Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — CULTURE, MEDIA AND SPORT

The Secretary of State was asked—

Film Industry

Ms Christine Russell: What plans the Government have to respond to the distribution needs of the film industry. [37404]

The Minister for Film and Tourism (Mr. Tom Clarke): I refer my hon. Friend to "A Bigger Picture", the report of the Film Policy Review group, co-chaired by myself and Mr. Stewart Till, to whom I give the thanks of my Department and, I am sure, of the House, for his splendid work with others. The report was published on 25 March. It proposes a number of measures to promote the wider distribution of British films.

Ms Russell: I congratulate my right hon. Friend on an excellent report, which I hope all right hon. and hon. Members will read. I am sure that my right hon. Friend shares my concern about the increasing difficulty that a number of film societies have in obtaining prints of new releases, especially when they are restricted to being able to show films on 16 mm equipment. I am sure also that my right hon. Friend agrees with me that we do not want to force the closure of all our town and city-centre film venues, thereby forcing everyone to get into his or her car to go out of town. Does my right hon. Friend have any plans—can anything be done—to keep film societies afloat?

Mr. Clarke: I am grateful to my hon. Friend for her comments on the review. There has been a positive response on both sides of the Atlantic.
I am aware of my hon. Friend's involvement with the Chester film society, which celebrates its 25th year in 1998. I know that the society uses 16 mm film. I shall be discussing with the British Film Institute a strategy for the use of modern methods of cinema technology, which I hope will include the interests of film societies.

Mr. John Whittingdale: Is the Minister aware that it is becoming harder and harder since 1 May to attract international film makers to this country because of the strength of the pound? Given that, why is it that the London Film

Commission, which was set up with the help of the previous Government and which has helped to attract millions of pounds of film investment into the capital, has received a grant insufficient even to guarantee its future until the end of the year?

Mr. Clarke: First, it does not help when the hon. Gentleman gets his facts considerably wrong. Secondly, it does not help when he talks down Britain when people abroad are investing in British films. We want to encourage them to do so.
The previous Government left not one penny to the Labour Government to save the London Film Commission. In spite of that, my right hon. and hon. Friends produced £100,000. Working with others, we saved the commission. It is delighted, as the hon. Gentleman should be.

Television Licence Concessions

Mr. Nick Hawkins: What plans his Department has to introduce further television licence concessions. [37405]

The Minister for Arts (Mr. Mark Fisher): The Government's agreement with the BBC provides for a review of future funding arrangements prior to March 2002. That review will include a detailed consideration of licence fee concessions.

Mr. Hawkins: I thank the Minister for his answer, but the House will be aware that, before the recent Budget, there was much floating of a trial balloon by the Government in relation to suggestions that there would be free television licences for all pensioners. Will the Minister confirm that the trial balloon was shot down because the Treasury simply refused to sanction the proposal?

Mr. Fisher: No. The trial balloon was floated by the media, not by the Treasury. The hon. Gentleman, having been parliamentary private secretary to the right hon. Member for South-West Surrey (Mrs. Bottomley), the previous Secretary of State, will know the difficulties surrounding the concession scheme. It is probably full of anomalies and imperfections. Our Department receives more correspondence about this matter than almost any other. It is genuinely a difficult matter. To extend the existing concession scheme to all pensioner households would cost, at latest figures, £471 million. That is a considerable sum, which we shall have to examine carefully when we come to the review.

Mr. David Winnick: Is my hon. Friend aware that on 16 January 1987 my private Member's Bill was voted down by 21 votes? Tory Cabinet Ministers were chauffeured from across the road to the House to vote down a Bill that would have given tremendous help to many pensioners. Does he agree that concessionary television licences should be introduced when it is possible to do so, because, as he says, so many elderly people want and need them? Such licences would be fair and a form of justice, and I shall continue to press for them to be introduced as early as possible.

Mr. Fisher: I am grateful to my hon. Friend for reminding hon. Members of his 1987 Bill. He will recall


that those who voted against it included the right hon. Member for South-West Surrey (Mrs. Bottomley) and the right hon. Member for Horsham (Mr. Maude)—their opposition says it all.

Piers (Lottery Funding)

Mr. Ronnie Fearn: How many piers in England and Wales have received lottery funding in excess of £100,000 since 1 May 1997. [37406]

The Minister for Film and Tourism (Mr. Tom Clarke): One seaside pier has received lottery funding since 1 May 1997. The Brighton west pier trust was awarded a grant of £10.6 million in March 1998 by the heritage lottery fund for the restoration of the pier's substructure.

Mr. Fearn: I thank the Minister for our recent meeting, which was helpful. The Secretary of State said in the lottery debate that his criterion would be that lottery funding would go to people rather than to buildings. I agree, but piers do not come into the category of buildings or into any other category: they are one of their own. Southport pier attracts 144,000 people each year, but it is in need of repair, and we need lottery funding. Will the Minister put piers in a different category when heritage funding is considered?

Mr. Clarke: On the general point, the hon. Gentleman and others can debate those matters when the National Lottery Bill is discussed. With regard to Southport pier, he led a delegation, which I was delighted to meet, and its members spoke fluently for their cause. To help the hon. Gentleman and his constituents, I should say that this is a matter for the heritage lottery fund, which expects to receive a revised application; it would be in their interests to submit it as soon as possible.

Mr. Ivor Caplin: The constituents of my neighbour, my hon. Friend the Member for Brighton, Pavilion (Mr. Lepper), who is not in the Chamber, are grateful for the £11 million investment in the Brighton west pier trust, which will generate about £30 million investment in the area. Is not such partnership funding the way to secure the future of piers such as the Brighton west pier, which is the only grade I listed pier in the country?

Mr. Clarke: I thank my hon. Friend for his remarks; the people of Brighton and many others are grateful for the funding. The major difference between Brighton west pier, which is of grade I status as my hon. Friend says, and Southport pier is that, until now, Southport pier, alas, has been grade II.

Arts

Mr. Nigel Waterson: What proposals he has to encourage the arts outside London; and if he will make a statement. [37407]

The Minister for Arts (Mr. Mark Fisher): The Government are determined that the arts and the work of artists should be encouraged and supported in every part

of this country, which is why my right hon. Friend the Secretary of State announced a new £5 million fund, the new audiences initiative, at the time of the Budget.

Mr. Waterson: I thank the Minister for that answer. Does he agree that many genuinely community-based groups in every aspect of the arts—for example, the Rude Mechanicals theatre group in my constituency—are benefiting or should benefit from funding through the Arts Council or through lottery funding every bit as much as high-profile organisations such as Covent Garden?

Mr. Fisher: I entirely agree, and I am delighted that the hon. Gentleman is obviously getting some early midsummer night's dreaming in with his Rude Mechanicals. Of course he is right. It is a well made point because it is the community arts, and particularly the non-professional arts, that contribute so much to cultural life and do not receive enough consideration either in the House or in the media.

Mrs. Gwyneth Dunwoody: Will my hon. Friend consider carefully the question of music in the sense both of music making and providing music? In the north-west, we have a vigorous tradition of excellent music, but, sadly, it looks as though some music teaching is to be abandoned in the education service, which is very worrying. It will deprive us of a whole sector of important cultural activity.

Mr. Fisher: My hon. Friend makes a very good point. It is underlined by, for example, last year's report of the associated board of the Royal Schools of Music, which shows a worrying trend and a decline in the number of people learning and teaching music. My right hon. Friend the Secretary of State and I are examining the matter with considerable urgency, and hope to make a substantial announcement later in the summer, with some new initiatives to kick-start the teaching of music in schools and for young people. The new initiatives that we are providing in the National Lottery Bill may help us to do that.

Mrs. Virginia Bottomley: In view of the pressure on the arts budget, particularly now that the Chancellor of the Exchequer has helped himself to so much lottery funding, does the hon. Gentleman have any plans to ensure that some of the major national London arts groups are funded directly by his Department rather than through the Arts Council? Does he intend that the Royal Opera house or English National Opera will be a direct client of his Department, as the museums are, and will no longer be, as I say, the Arts Council's responsibility, which would clear its desk, so that it could help the arts outside London more evenly?

Mr. Fisher: No. We have no such plans, although, as part of our departmental spending review, we are examining the whole way in which our Department allocates its expenditure.
On the right hon. Lady's first point, she must not continue to make a point that she knows is not correct. As a result of the national lottery, £10 billion comes to cultural life and the good causes. That money is still coming, and it is going to do good throughout the country. She should recognise and welcome that.

Museums and Galleries (Dudley)

Mr. Ross Cranston: What measures he has taken to ensure that the new access fund supports museums and galleries in Dudley. [37408]

The Secretary of State for Culture, Media and Sport (Mr. Chris Smith): Perhaps I might be permitted to observe at the outset that access to cultural recreation, particularly sporting activity of all kinds, was something dear to the heart of our late and much loved colleague Denis Howell. We remember him today with great affection.
On the specifics of my hon. Friend's question, museums and galleries in Dudley may apply for support from the heritage lottery fund's access fund in the same way as all other museums and galleries throughout the United Kingdom. A total of £7 million has been set aside for that purpose for 1998–99.

Mr. Cranston: I thank my right hon. Friend for that answer, and congratulate him on the moneys that have been made available. I raise two issues for the longer term. The first concerns education packs. As a matter of policy, Dudley museum does not charge, but it does have to charge for education packs, even though teachers can freely reproduce them.
The other issue concerns, I am sure, other museums—physical access. Many of the museums are in older buildings. Physical access is difficult for older people and disabled people. For example, in Dudley museum recently, we had an exhibition on the first world war. Many older people had great difficulty getting in. Will my right hon. Friend take those two points into account in the long term?

Mr. Smith: Yes. Both those issues, which my hon. Friend has rightly raised—the development of educational initiatives in museums and galleries and the ability of people with physical impairment to gain physical access to museums and galleries—would fall specifically within the province of the heritage lottery new fund. Dudley museum will, I am sure, be interested in putting in an application for consideration.

Media Mergers

Mr. Peter Viggers: If he will make a statement on the Government's policy on cross-border media mergers. [37410]

The Secretary of State for Culture, Media and Sport (Mr. Chris Smith): The Government have no plans to amend the media ownership rules revised by the Broadcasting Act 1996. These permit, of course, cross-border holdings within the European Union.

Mr. Viggers: On how many occasions in the past year has the Prime Minister personally intervened in such matters?

Mr. Smith: As far as I am aware, the Prime Minister has had one 30-second reference to the matter in a conversation with the Italian Prime Minister, and on no other occasion has he intervened.

Mr. Barry Sheerman: Is my right hon. Friend aware that many of us who live in the regions

are more concerned about what happened to cross-border television and independent regional television services under the previous Government, when many of us lost our independent regional broadcasting? Is it not about time that we reminded the viewing public of that? Will the Labour Government make sure that there are independent news services and local community services when companies such as Granada Television, which took over Yorkshire Television, become part of a much greater sector?

Mr. Smith: My hon. Friend raises an extremely important point. The regional character and flavour of programme making, especially in the ITV network, has been one of the great strengths of independent television over the years. Sadly, it was put in some danger by the changes introduced by the previous Government, who seemed completely uninterested in quality and interested only in the price tag when they changed the franchising system. We have made it very clear to the Independent Television Commission that we regard it as one of its prime duties to uphold the regional character and the regional sourcing of programmes when it considers matters relating to ITV.

Mr. Owen Paterson: How predominant does an international multi-media group have to become before it triggers concern and intervention by this Government?

Mr. Smith: The rules are very clearly laid down in legislation passed by the Conservative Government.

Drama and Television

Mr. Austin Mitchell: What assessment he has made of the contribution which (a) drama and (b) television make to the United Kingdom economy. [37411]

The Minister for Film and Tourism (Mr. Tom Clarke): No separate estimate is available for drama, although the revenues of the much wider other entertainments category totalled nearly £6 billion in 1997. Television and radio combined had total revenues of almost £10 billion in 1997.

Mr. Mitchell: The figures that my right hon. Friend has just given go some way to illustrating the importance of these industries. Given their impact on employment and the balance of payments, and given also that they brighten the quality of our lives, is there not a case for adding to the help, support and encouragement that he has already given them, especially in respect of training, which has suffered badly from the fragmentation of the television industry? That would enable us to do better at combating the huge advantage that the Americans gain from their huge domestic market, and the huge advantage that the French have from cultural and linguistic subsidies.

Mr. Clarke: My hon. Friend makes a very interesting point. I welcome, as I am sure he does, the dialogue between film and television, and the interest of both in training. My hon. Friend is right to draw attention to the fact that total revenues of spectrum estimates indicate a turnover from the creative industries as a whole of around


£55 billion, £12 billion of which is generated from exports. Creative industries like those to which he referred are of the utmost importance to my Department and to my right hon. Friend the Secretary of State, and my hon. Friend can be sure that we share his values.

Mr. Michael Fabricant: Is it not the case that most people who work in the film industry originally trained in television, not only at the BBC but with independent companies? Although I welcome the last Budget, which helped the film industry, will the right hon. Gentleman urge the Chancellor of the Exchequer also to give some thought to withholding tax, which at present is still a disincentive for some American film companies to come to the United Kingdom, even though they invest here in large numbers?

Mr. Clarke: It ought to be said that, with regard to the film industry, the Chancellor of the Exchequer has been the most generous Chancellor in history. In his Budget, within eight weeks of being in government, he gave a three-year, 100 per cent. write-off to film production. On the day that the document that I have in my hand was published, in which the review group—consisting in the main of people from the film industry, from television and from skill set involved in training—recommended an extra year, the Chancellor outdid even that and gave an extra two years, so things are not going too badly.

Mr. Peter L. Pike: My hon. Friend the Minister will know that the film review recommended that the broadcasting industry—which makes tremendous use of film—should contribute to the all-industry fund. Has he had any response from the television industry to that proposal?

Mr. Clarke: My hon. Friend makes a valid point. BBC, Channel 4, ITV and BSkyB already have a good record of investing in film production. Broadcasters recognise that the voluntary contribution suggested in the review is appropriate for all who now use film, including broadcasters and cinema and video distributors. There has been a very positive response.

News International

Mr. Tim Collins: What meetings he has held with representatives of News International in the last month to discuss cross-media ownership; and if he will make a statement. [37412]

The Secretary of State for Culture, Media and Sport (Mr. Chris Smith): I have not held any meetings with News International to discuss this subject in the last month. I briefly met Mr. Rupert Murdoch and representatives from BSkyB—in which News International has a 40 per cent. holding—together with other key players in the European audio-visual industry, at the Birmingham audio-visual conference on 6 April.

Mr. Collins: Has the Minister or any of his officials ever discussed policy issues relating to News International with Mr. Tim Allan at No. 10 Downing street? Does he believe that 28-year-old Mr. Allan has been offered a

salary of £100,000 a year because of his mastery of the motor scooter or because of his access to the heart of Government?

Mr. Dale Campbell-Savours: The politics of envy.

Mr. Smith: The answer is no—I have never discussed such matters with Mr. Allan. That question, coming from a former Tory communications director, smacks a little of jealousy.

Mr. Denis MacShane: Does my right hon. Friend welcome the statement that Mr. Murdoch made at the Birmingham conference, when he said that he looked forward to the day when Britain was fully integrated into Europe? Does my right hon. Friend agree that the traditional strength of the British audio-visual industry is such that it should be the leading player in Europe? Far from adopting the rather xenophobic protectionist line of Conservative Members—just sour milk because Rupert has gone off them—should we not be backing any British companies that promote British film and British media ownership across Europe and the rest of the world?

Mr. Smith: I did, indeed, note with considerable interest Mr. Murdoch's statement in his speech at the Birmingham conference, when he looked forward to the future integration of Europe. However, he made one or two other observations with which I could not agree, such as his attack on public service broadcasting. I tried to put the record right with a robust defence of public service broadcasting during my closing speech at the conference.

Mr. Francis Maude: At the time when the Prime Minister acceded to Mr. Murdoch's request to intervene with the Italian Prime Minister in favour of the recent BSkyB bid, did he know that his deputy press spokesman was already negotiating to take on a senior job with BSkyB? Was Mr. Allan the conduit for Mr. Murdoch's request for help? Were Cabinet Office officials consulted about his subsequent appointment? Did they know of any role that Mr. Allan played in the Prodi affair?

Mr. Smith: I think that most people are interested in rather more substantive issues, which include the matter on which Mr. Murdoch addressed the Birmingham conference last week. That related to the approval which I gave on 13 October last year for the start-up by the BBC of 24-hour news—something which Mr. Murdoch and BSkyB greatly resented.
Any charges that this Government give particular favours to particular media companies are completely false. We deal with each issue on its merits, as my decision in October shows.

Lottery (Burton)

Mrs. Janet Dean: How lottery distributors, when formulating their strategy, will assess need in the Burton constituency. [37413]

The Secretary of State for Culture, Media and Sport (Mr. Chris Smith): Distributors will consult widely when drawing up their strategies. This consultation will include local authorities and other local interests. The new proposed policy directions, drafts of which are in the Library of the House, emphasise the need to ensure that lottery funds reach all parts of the country and all sections of society.

Mrs. Dean: I welcome my right hon. Friend's reply. My constituency has some of the most deprived wards in the west midlands. Will the new lottery legislation ensure that help gets to where it is most needed in those wards?

Mr. Smith: Yes, in two ways. First, the new policy directions—drafts of which I have issued—will ensure that all lottery distributors take proper account of the need to combat social deprivation when considering making grants. Secondly, distributors will be able to instigate fast-track procedures for small community grants which will get rid of a lot of the red tape and excessive paperwork which at the moment bedevil applications by small community organisations eminently deserving of grant.

Mr. Francis Maude (Horsham): Will not the National Lottery Bill result, effectively, in the decisions on which projects in Burton are supported by lottery funds being taken by Ministers? Is that not why virtually every Labour Back Bencher who spoke in support of the Bill at Second Reading did so on the explicit basis that the Bill will make it easier for the Secretary of State to direct lottery money to the constituencies of Labour Members of Parliament?

Mr. Smith: No, Madam Speaker. It may not surprise you that the right hon. Gentleman is wrong on all counts. I was interested to receive a letter from the right hon. Member for South-West Surrey (Mrs. Bottomley)—the former Secretary of State—who spends most of her time, like the right hon. Gentleman, accusing us of creating the new opportunities fund to somehow deal with our priorities. In her letter she referred to a dyslexia centre in her constituency, and said:
The changes in direction—
the changes we are proposing in the Bill—
should provide an excellent opportunity for them. I wonder if you could brief me on the likely timetable in which applications will be received for the new opportunities fund.
Opposition Members are seeing the wonderful opportunities that will come about through the legislation.

Lottery Funding

Mr. Dennis Skinner: What plans he has to review the criteria relating to the eligibility of good causes to receive lottery funding. [37414]

The Secretary of State for Culture, Media and Sport (Mr. Chris Smith): The National Lottery Bill creates a new, sixth good cause encompassing health, education and the environment. I am consulting on a new package of draft policy directions governing the distribution of lottery funds for the existing good causes, and expect to issue the formal directions shortly.

Mr. Skinner: Does my right hon. Friend agree that one of the things which characterised the lottery when it was

run by the Tory Government was that they favoured their own people and their own marginal seats? As evidence of that, the three seats in north Derbyshire—Bolsover, North-East Derbyshire and Chesterfield—finished in the lowest 10 per cent. of all constituencies in Britain in terms of receiving grant. It is clear that somebody was making a serious attempt to ensure that we did not get much of a return. Since the Labour Government are in charge, will my right hon. Friend remedy that and help those areas of social deprivation? It is not a matter of favouring anybody—it is about favouring those people who have not had a fair crack of the whip hitherto.

Mr. Smith: My hon. Friend is absolutely right. This should not be a matter of favouring particular parts of the country because of their political affiliation. It should be about ensuring that there is a fair geographical spread across the country and that issues of social deprivation are properly taken into account. Both will result from the changes in direction and legislation that we are proposing.

Dr. Julian Lewis: Is the Secretary of State aware of the concern expressed by the chief executive of the mental health charity Sane about the fact that her helpline, which deals with many thousands of people who are contemplating suicide, has had its applications for lottery grants turned down three times, whereas a helpline for owners bereaved after the death of a pet, which deals with a much smaller number of people, has received a grant of £180,000? Does he not think that a strange set of priorities? Does he agree that the lottery of the lottery should be in the choosing of numbers and the winning of prizes, not in the awarding of grants?

Mr. Smith: Certainly the awarding of grants should not be a lottery, but the hon. Gentleman will know—as, indeed, the Conservative Front-Bench spokesman has just pointed out—that those decisions are strictly a matter for the National Lottery Charities Board, not for me.

Cricket

Mr. Simon Hughes: What steps he is taking to improve standards in cricket in the United Kingdom. [37418]

The Secretary of State for Culture, Media and Sport (Mr. Chris Smith): Working through the English Sports Council, we are encouraging the England and Wales Cricket Board in its plans to widen access to the game, to build the quality of the competitive game in England and to improve performance in international competition.

Mr. Hughes: That is a good statement of principle, for which I thank the Secretary of State. Will he be more proactive in ensuring that standards are such that we can expect to win test series this year and in the future, rather than think that we will win, but then lose? Will he consider calling for an audit, local authority by local authority, of facilities for teaching cricket and of incentives to youngsters to learn? On each estate in constituencies such as his and mine, places could be marked out as nets—it is very simple—so that kids could play cricket in the yard just as they play football and other games. If that happened, we might get people who could win some test matches for us.

Mr. Smith: Like the hon. Gentleman, I look forward with a mixture of optimism and trepidation to the test


matches against South Africa and Sri Lanka later this summer. It is important that we ensure the promotion of excellence, which is why we very much hope that the England and Wales Cricket Board will put forward proposals for a national cricket academy as part of the United Kingdom sports institute network.
It is also important that we consider the broad base of mass participation, which is why I am sure that the hon. Gentleman will have welcomed the decision that I took with my right hon. Friend the Secretary of State for Education and Employment to halt the unnecessary sale of school playing fields, so that schoolchildren have the facilities to learn and play.

Mr. Robin Corbett: Will my right hon. Friend congratulate the England women's cricket team, which returned to this country yesterday morning—on the same plane as me—from its successful tour of South Africa? What steps are his Department taking to encourage more women to take part in cricket?

Mr. Smith: I congratulate both the England women's cricket team and my hon. Friend. I am particularly pleased that £157,000 of world-class performance grants have been made available to the team so that it can develop the excellence of its game. I am also pleased that the Women's Cricket Association has decided to merge with the England and Wales Cricket Board, which I think bodes well, especially for the board.

Sir Peter Tapsell: Is it not rather bizarre that anyone should look to the Government to improve cricket, as the essence of new Labour spin doctoring is that it is not cricket?

Mr. Smith: The hon. Gentleman is batting on rather a sticky wicket. It is important that the Government ensure mass participation in sports of all kinds, including cricket, and excellence. Both are very much at the heart of the Government's sports policy.

Dr. Norman A. Godman: As the question refers to cricket in the United Kingdom, may I remind the Secretary of State that cricket is played in Scotland and that Aberdeen cricket club had a Caribbean professional long before the 1939–45 war? I further remind him that some Scots have played for England, and that two of the world cup games will be played in Scotland. Will he impress upon my right hon. Friend the Secretary of State for Scotland the need to increase coaching facilities throughout Scotland? My right hon. Friend the Member for Glasgow, Anniesland (Mr. Dewar) and his colleagues in the Scottish Office are not known as great cricket fans. We need an expansion of cricket coaching facilities throughout Scotland.

Mr. Smith: My right hon. Friend the Secretary of State for Scotland is well known, however, as a man of great fairness and integrity and I am sure that he will have listened carefully to my hon. Friend, whose remarks I shall draw to his attention.

Oral Answers to Questions — MINISTER WITHOUT PORTFOLIO MILLENNIUM EXPERIENCE

The Minister was asked—

Millennium Dome

Mr. Barry Sheerman: What action he is taking to ensure that the millennium dome will enable the best British design and innovation to be exhibited. [37434]

The Minister without Portfolio (Mr. Peter Mandelson): The dome itself is a flagship of British design and innovation—Richard Rogers's design, in scale and construction, shows the world the best of the nation's talent and creativity; the content will be a reflection of the spectacular imagination of British companies and British-based designers.

Mr. Sheerman: Did my hon. Friend see the report by Business Strategies last week pointing up the vital importance to this country's future wealth creation of the creative industries, including those in design and innovation? As so much interest is being expressed by people at home and overseas in visiting the dome, will he ensure that the impact of the dome and what happens in it are not just felt during its time, but will influence future creativity, innovation and design as we go into the millennium?

Mr. Mandelson: My hon. Friend makes a good point, with which I agree. It is extraordinary that some people in this country like to carp and sneer at our creative industries and at what they call "cool Britannia". My hon. Friend is right to draw attention to the Business Strategies report of last week, which noted that the creative industries contribute some £50 billion to our national economy and that they will be the fastest-growing source of new jobs between now and 2006.
While I am on the subject of jobs, I should say that in today's Evening Standard, it is estimated that millennium tourism will create 50,000 new jobs. That is what the Evening Standard calls a "jobs bonanza". I do not care what the paper calls it: it will be good news for many people and their families in this country.

Mr. Francis Maude: Will the hon. Gentleman confirm that the dome's token nod to British content, which is apparently to be called "UK@ Now", is being designed by a Frenchman? Is that the Frenchman who described the dome as "very un-British", which the Minister said last week he took as "a great compliment"? Does he agree with the spokesman for the dome who, when the story about the French designer came out, said:
As far as we are concerned David Bentheim is doing it himself but if he wants to farm it out to someone else that is cool with us.
Does that not make a mockery of the Prime Minister's brave words at the launch that the dome is
a display of confidence in the creativity and talents of our people"?
Presumably he meant British people.

Mr. Mandelson: I notice that, the better we do and the more progress we make in constructing the millennium


dome and its contents, the weaker the right hon. Gentleman's questions become. One day he will give us all a shock and say something positive about the millennium dome, which was, after all, his party's original idea. However, perhaps it is just very cool in today's Conservative party to pour cold water on the ideas and vision that were originally shown by his right hon. Friends.

Millennium Experience

Mr. Andrew Mackinlay: What events are proposed at the millennium experience for the evening of 31 December 2000. [37435]

The Minister without Portfolio (Mr. Peter Mandelson): I am tempted to say that my hon. Friend should give us a break before asking questions about the closing ceremony. Preparations for that ceremony are at an early stage, and it is too soon for final decisions.

Mr. Mackinlay: I am somewhat disappointed by the tone of that reply, bearing in mind the fact that the eve of the millennium is the last day of December 2000 and the first day of the millennium is 1 January 2001. When we are emphasising the need for arithmetic to be taught correctly in schools, I should have thought it incumbent on Her Majesty's Government to mark the arithmetically correct time of the millennium change.

Sir Patrick Cormack: indicated assent.

Mr. Mackinlay: Before they nod, Conservative Members should reflect on the fact that they got it wrong as well. It is important that this Parliament should at least give some recognition to the fact that the eve of the millennium is the last day of 2000. We should get it right, or we shall look profoundly silly. The Victorians got it right: newspapers of 1900-01 show that they marked the change of the century on the eve of 1901. We ought to be able to get it right, too.

Mr. Mandelson: Whatever the technical truthfulness of my hon. Friend's observation, I can assure him that, whenever the opening and closing ceremonies take place, they will reflect the full breadth and success of the celebrations that we have planned. I am determined to ensure that the whole year-long celebrations are accessible to as many people as possible, and not only to the well-heeled and the very important.

Mr. Michael Fabricant: Whatever the closing date of the dome may be—or perhaps, following the question of my right hon. Friend the Member for Horsham (Mr. Maude), I should say, "la date de fermeture"—is it not completely irrelevant, given that, although there were supposed to be 12 million visitors, we have already heard that the plan to provide river transport has failed, and London Transport says that there will not, after all, be 24 trains an hour? How can there be a closing, when the opening will be unsuccessful, as nobody will be able to get there?

Mr. Mandelson: The innovative integrated transport systems that are being developed—the Jubilee line

extension, the new river services and riverside walks, and even a cable car service across the Thames—will be among the most important legacies of the millennium experience.
The article in The Times last week was not correct, as I shall set out in a letter to the editor. As part of his Thames 2000 initiative, my right hon. Friend the Deputy Prime Minister announced last month—[Interruption.] Conservative Members may not like to hear the facts, but I shall give them to the whole House none the less. My right hon. Friend announced the allocation of £21 million to boost new passenger services on the river, and we expect 1 million people to travel to Greenwich by boat from central London using those services, which will certainly become a jewel in the capital's transport network.

Mr. Paddy Tipping: What progress has been made on the national programme for the millennium experience. [37436]

The Minister without Portfolio (Mr. Peter Mandelson): The New Millennium Experience Company has established 12 national programme offices in the nine regions of England and in Northern Ireland, Scotland and Wales. Staff in those offices are providing a one-stop shop source of information about how to engage in the United Kingdom-wide programme of events and activities and in the nation's millennium festival.

Mr. Tipping: Is my hon. Friend aware of the feeling in north Nottinghamshire and, I suspect, in Hartlepool, that people living in London and the south-east are advantaged to the disadvantage of people in the midlands and the north? Will he take steps to ensure that people throughout the United Kingdom have the opportunity to celebrate the millennium?

Mr. Mandelson: The Government are absolutely determined to ensure affordable access to the millennium dome for all people from every part of the country, but the millennium does not mean only the dome. It means the £100-million nationwide festival of sporting, artistic and heritage events, bids for which can be submitted from next week; the huge range of capital projects being funded by the millennium commission at over 3,000 locations throughout the country; and the millennium awards, which will fund ordinary people throughout the country to do extraordinary things, from pensioner inventors in Cornwall to special needs workers in Northamptonshire. In other words, it means a national movement to change the landscape of our country and really make a difference to the way we live our lives. That is what the millennium celebrations mean, and that is why the Government are backing them.

Mr. James Gray: Is the Minister not aware that the millennium celebrations actually mean the 2,000th anniversary of the birth of Jesus Christ? Is he not ashamed of the fact that, throughout all that great tirade and, indeed, his answers to the other questions this afternoon, he did not mention that once, and that the importance he gives to it in his dome is so ludicrously small?

Mr. Mandelson: The hon. Gentleman's view is not shared by His Grace the Archbishop of Canterbury,


with whom I had a recent meeting and who expressed himself well content with the proper acknowledgement that we are giving to the birth of Christ and the contribution of the Christian religion to this country. We will continue to work with him, his colleagues and other members of the multi-faith Lambeth group to ensure that all those objectives are properly reflected and fulfilled.

Oral Answers to Questions — CHURCH COMMISSIONERS

The hon. Member for Middlesbrough, representing the Church Commissioners, was asked—

Bishops (Vehicles)

Mr. Norman Baker: What vehicles are available to bishops and how many chauffeurs are supplied; and what was the total cost of running these vehicles, including depreciation, and employing the chauffeurs for the latest year for which figures are available. [37445]

Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): Official cars provided for bishops have engine capacities in a range from 1.6 to 2.3 litres. In 1997, the net cost of providing and maintaining bishops' cars was £279,000. Seven bishops use their own cars and are paid a mileage allowance. In 1997, 31 bishops employed full or part-time drivers. The cost of those to the commissioners was £317,000.

Mr. Baker: Does the hon. Gentleman agree that money spent on chauffeurs and very large-engined cars is not regarded sympathetically by people in parishes who see their churches closing and otherwise short of money? Would the money not be better diverted to helping to take the Christian mission to the country at large?

Mr. Bell: I am grateful to the hon. Gentleman. Bishops have a demanding ministry, as he will know, and an increasing work load. The use of a driver can give them valuable extra time and relieve them of some pressure when travelling to and from their many and varied engagements. Several of the drivers also work as gardeners or handymen at see houses, or are part-time.

Arms Exports

Ann Clwyd: What discussions he has had on the arms exporting policy of companies in which the Church Commissioners have invested. [37446]

Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): The question of company policy on the export of arms has recently been put to GEC and GKN. Both companies have given assurances that they adhere strictly to the United Kingdom Government's licence terms for such sales.

Ann Clwyd: Has my hon. Friend followed events recently in east Java, Indonesia, where, on 8 April, British-supplied water cannons were used to fire toxic

liquids and tear gas at unarmed students? Is it not time that the Church Commissioners reviewed their policy in view of those facts, especially as the water cannons have been used not once but many times against unarmed demonstrators? They should review their policy in the light of those incidents and I want my hon. Friend's assurance that they will do just that.

Mr. Bell: I am grateful to my hon. Friend for raising those matters; as she habitually does. The Church Commissioners are always grateful to her, and listen to her with great care. As Church investors, we are acutely aware of the strength of feeling that those issues arouse within the Church and among the public at large. Our policy as commissioners draws a distinction between, on the one hand, a legitimate British defence industry that supplies equipment under Government licence to the Ministry of Defence and our NATO partners and, on the other, the supply of equipment as part of the international arms trade, albeit also under Government licence.

Ethical Investment

Mr. Simon Hughes: What recent discussions have taken place between the Church Commissioners and diocesan authorities about ethical investment. [37447]

Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): Members of the Church of England's ethical investment working group frequently meet and give presentations to various diocesan bodies regarding the Church's ethical investment policy.

Mr. Hughes: Would the hon. Gentleman ensure that there is not merely regular or some contact between the dioceses and the Church Commissioners, but some mechanism whereby, before any decision is taken by a diocese, such as mine of Southwark, which I read had invested in the defence industries, it is fully briefed on the implications and alternatives, and on issues that relate to the Jubilee 2000 repayment of debt agenda? Many countries that buy arms sold by the companies in which our diocese invests could pay off or reduce their debts and spend on more worthwhile activities if they did not buy those arms.

Mr. Bell: Under the Cathedrals Measure 1963, chapters are requested to seek our advice before investing, although they are not required to follow it. The Church Commissioners publish information about the ethical investment policy of the Church's central investing bodies. It is widely circulated and a report is made annually to the General Synod of the Church of England. As the hon. Gentleman knows, there is a review of the Cathedrals Measure, and a Cathedrals Measure will come before the House shortly.

Oral Answers to Questions — MINISTER WITHOUT PORTFOLIO MILLENNIUM EXPERIENCE

The Minister was asked—

Millennium Dome

Mr. Desmond Swayne: If he will make a statement regarding the role of BSkyB as a sponsor of the millennium dome. [37438]

The Minister without Portfolio (Mr. Peter Mandelson): BSkyB is one of the four founding partners of the millennium experience. Founding partners have the opportunity to work with the New Millennium Experience Company's staff and design teams in developing the content of exhibits in the dome. Additionally, where founding partners' support covers the company's challenge programme of country-wide events and activities, they will have similar opportunities to work with the company's staff in the development of that programme.

Mr. Swayne: Will BSkyB get any exclusive television coverage rights?

Mr. Mandelson: No, it will not.

Ms Diane Abbott: Given the public interest in sponsorship and other arrangements for the dome, when does the Minister intend to publish the business plan for the millennium dome, in line with the recommendations of the Select Committee on Culture, Media and Sport?

Mr. Mandelson: The initial draft of the company's corporate plan has already gone, under cover of confidentiality, to the Select Committee. It will duly be published for the House and the public to read.

Millennium Celebrations

Mr. Rhodri Morgan: What proposals he has, through the New Millennium Experience Company, for celebrating the millennium in Scotland, Wales and the English regions. [37439]

The Minister without Portfolio (Mr. Peter Mandelson): The New Millennium Experience Company has established 12 national programme offices in the nine regions of England and in Northern Ireland, Scotland and Wales to ensure that the millennium experience programme of UK-wide events and activities running before and during 2000 offers as many opportunities as possible for people across the country to take an active part. In addition, the company's 12 local offices will provide a one-stop shop source of information about how to take part in the millennium festival programme which will run during 2000.

Mr. Morgan: I am grateful to the Minister for that reply, as one just about old enough to remember with great fondness the 1951 festival of Britain, both on the

south bank and all the events in my home village of Radyr, which I now have the honour of representing. Does he agree that, while Greenwich will be essentially regarded as an urban festival, matters such as improving access to the countryside for 2000 and beyond are important? For many of us, the right to roam is as important as the right to dome, if not more so.

Mr. Mandelson: I very much share my hon. Friend's sentiment. It is important that, in formulating ideas and, plans for locally based, do-it-yourself millennium celebrations and festivals, the matching funds from the millennium festival fund are sought by rural as well as suburban and urban areas. I hope that that will be the case. I shall ensure that the offices of the New Millennium Experience Company, which administers the millennium festival fund, seek to encourage and look kindly upon any such applications from local groups and organisations in rural areas.

Mr. Owen Paterson: Over the recess, I met Mr. Stephen Martin of Virtex, which runs virtual reality systems that would allow the millennium dome to be enjoyed by every citizen in the country who has access to the internet. That project was encouraged by my hon. Friend the Member for Esher and Walton (Mr. Taylor), but the company has now learnt from a reliable source that a Japanese system might have been chosen. Why is that?

Mr. Mandelson: I shall, of course, look into the matter; I have no detailed information on it at my fingertips. Wherever possible, we seek to make sure that the supplies for the dome, both for its construction and for its contents, come from British companies. If British companies have failed to compete successfully on this occasion, I very much regret that. However, as I said, I shall inquire with the company and see what the facts of the matter are.

Spirit Zone

Mrs. Virginia Bottomley: What representations he has received about the use of the term "spirit zone". [37440]

The Minister without Portfolio (Mr. Peter Mandelson): The New Millennium Experience Company's working title for the zone, which aims to explore the values that underpin our society and how they are expressed through faith and belief, is spirit level. The New Millennium Experience Company has received two representations about the use of the term "spirit level" arising from the company's continuing consultations with the Lambeth group on the content of the zone.

Mrs. Bottomley: Is the right hon. Gentleman aware that Christians and other faith groups had their worst fears confirmed when the contents of the dome were launched at The People's Palace, the same place where Labour celebrated its victory? Their fear is that the Government are exploiting the dome for party political purposes. The term "spirit level" is an insult to the Christian faith and to other religions, and sounds more like a place where Mystic Meg should hang out.

Mr. Mandelson: That is rich coming from the right hon. Lady, the leader of whose party said recently that he would rather take a walk than go to church.

Northern Ireland (Belfast Agreement)

The Secretary of State for Northern Ireland (Marjorie Mowlam): With permission, Madam Speaker, I should like to make a statement, which the House has wanted to hear for many years, on the succesful conclusion of the multi-party talks in Belfast.
It is my privilege to be able to tell the House that a comprehensive political agreement was reached late in the afternoon of 10 April—Good Friday. The text has been published as Cm 3883. A copy is being sent to every home in Northern Ireland. I am very grateful to the Post Office for providing this service at business rate, so that people across Northern Ireland have a chance to study the agreement in detail.
The Government's main aim throughout these negotiations has been to secure political stability and lasting peace for all the people of Northern Ireland. As a result of what is being called the Good Friday agreement, that goal is now in sight.
This is a unique agreement born of a unique set of negotiations that involved Unionists, nationalists, republicans and loyalists around the same talks table. This is a situation in which, although compromises have been made, everyone can be a winner. Everyone's political and cultural identity is respected and protected by this deal. Northern Ireland politics, for so long, has been seen as a zero sum game. This agreement demonstrates the potential for the people of Northern Ireland to move beyond that, into a new type of politics in which everyone can gain. This agreement represents a sensible, fair and workable way forward for both communities.
I should like to pay a particular tribute today to the negotiating teams of all the parties involved. I should also like to pay tribute to a group who, though often vilified, have worked for many years to bring about this agreement, often at personal risk to themselves and their families—the civil servants in both Northern Ireland and the Republic.
It is important, when we are talking about all the positive developments, that at the same time we do not lose sight of the terrible price that has been paid by the victims of violence and their families. No amount of progress in the search for lasting peace will bring back those loved ones who have been lost, or take away the pain felt, day in and day out, by their families. I hope that Ken Bloomfield's victims commission, which we have set up and which I hope will report later this month, will provide us with some practical suggestions as to how we can best recognise the suffering endured by the victims of violence and their families.
Many of those families say to me similar words to those that are actually printed in the agreement:
the achievement of a peaceful and just society would be the true memorial to the victims of violence.
The main elements in the agreement are as follows. First, on constitutional issues, the British and Irish Governments have formally resolved our historical differences through the general and future acceptance of the principle of consent, which means that Northern Ireland is part of the United Kingdom, and will stay that way for as long as that is the wish of a majority of people who live there; and it means that, if the people of Northern

Ireland were formally to consent to the establishment of a united Ireland, the Government of the day would bring forward proposals, in consultation with the Irish Government, to give effect to that wish.
Under the agreement, the Irish Government will bring forward proposals to amend the Irish constitution to bring it into line with this understanding, and the necessary changes will also be made to the British constitutional legislation.
The second part of the agreement says that there will be greater democratic accountability in Northern Ireland through the devolution of a wide range of executive and legislative powers to a Northern Ireland assembly. In the assembly, the posts of executive authority will be shared out on a proportional basis, and safeguards will be in place to protect the interests of both the communities.
Thirdly, there will be a north-south ministerial council, which will bring together those with executive authority, north and south, to work together by agreement on matters of mutual interest. Those participating on the council will be mandated by, and remain accountable to, the assembly and to the Irish Parliament; and at least six "implementation bodies" will be identified within the next six months to put decisions taken by the council into effect, either on a cross-border or all-island basis, in specified areas. More such bodies or mechanisms may be established by agreement between the two sides, north and south.
Fourthly, there will be a British-Irish council, to bring together our two Governments, and representatives of devolved administrations in Northern Ireland, Scotland and Wales and from the Channel Islands and Isle of Man. This development builds on the Government's radical programme for constitutional reform.
Fifthly, there will be a new British-Irish agreement to replace the Anglo-Irish Agreement of 1985. This will be brought into effect as soon as the other elements of the deal are in place.
The British-Irish agreement sets out the new shared understanding on constitutional matters. It also creates a new British-Irish intergovernmental conference, which will deal with all bilateral issues between the two Governments. In recognition of the Irish Government's special interest in relation to Northern Ireland, there will continue, as now, to be regular meetings between myself and the Irish Foreign Minister. However, in future, relevant executive Members of the Northern Ireland assembly will also be involved in those meetings, to discuss non-devolved issues that arise in relation to Northern Ireland.
In addition, the existing joint Anglo-Irish Secretariat at Maryfield will close before the end of this year.
The agreement also includes a range of measures to enhance the proper protection of basic human rights. It will include a new independent human rights commission in Northern Ireland, which is there to consult and advise on the scope for defining rights supplementary to those in the European convention on human rights, which the Government are in the process of incorporating into United Kingdom law.
There is also public consultation under way about the proposals in our "Partnership for Equality" White Paper. Subject to that consultation, those proposals—including the establishment of a powerful new equality


commission—are reflected in the agreement, along with a number of other proposals to encourage parity of esteem between the two main political and cultural traditions.
Finally, the agreement looks ahead to the creation of a normal and peaceful society in Northern Ireland. It establishes a clear process of the decommissioning of illegal weapons that can start forthwith, and a commitment by all the parties to work constructively in good faith with the independent commission, and to use any influence they have to achieve the decommissioning of all paramilitary weapons within two years of the referendum. It commits both Governments to reducing the profile of security measures and emergency legislation as the threat to peace and good order reduces.
There will also be an independent commission to consider what policing service would be appropriate in a Northern Ireland free from the threat of terrorist violence, and would be capable of fully commanding the support of both communities. There will be a parallel review of the criminal justice system.
The agreement also commits both Governments to put in place mechanisms to provide for an accelerated programme for the release of prisoners. Let me be clear: this is not an easy issue for anyone, but it is an indispensable part of this agreement. For our part, the British Government will establish an independent sentence review body to look at each prisoner on a case-by-case basis to determine their eligibility for release.
Most eligible prisoners will qualify for release on licence within two years. If the circumstances allow, the remainder will be released at that point. It must be emphasised, however, that this time frame is variable, depending on the degree of genuine commitment to peace.
Prisoners associated with groups that do not maintain a complete and unequivocal ceasefire will not qualify. Prisoners who do qualify will be released on licence and returned to prison if they engage in any further terrorist activity. These are crucial safeguards, and a briefing note giving more detail of the specifics of the proposed arrangement has been placed in the Libraries of both Houses.
This agreement was made possible by the efforts of many people—most of all by the leaders of the political parties involved in the negotiations. The House will, I am sure, wish to join me in paying tribute also to the exceptional chairmanship skills of the former Senator, George Mitchell, and his two assistants, the former Prime Minister of Finland, Harri Holkeri, and Sir John de Chastelain.
No less crucial was the constant support and the direct involvement of my right hon. Friend the Prime Minister, particularly over the last few crucial days of the negotiations. His efforts were matched by those of the Taoiseach, Bertie Ahern, who rose above the personal tragedy of his mother's death to play an equally decisive role.
Hon. Members will also appreciate the enormous value of having a broad political consensus in support of the talks process, both here at Westminster and in the Irish parliament. I should like to pay tribute to the work of the right hon. Members for Huntingdon (Mr. Major) and for Cities of London and Westminster (Mr. Brooke), and to Lord Mayhew and his colleague the right hon. Member for Devizes (Mr. Ancram).
Equally, successive Irish Prime Ministers and Ministers for Foreign Affairs in the Republic have played a crucial role. In addition, I should like briefly to thank President Clinton, who has been an invaluable support during the talks process. I could go on—many other Governments and people have been involved, including the European Union. All of them have made an incredible difference, but I just thought it important to put our appreciation on record.
I am laying an order today setting 22 May as the date for the referendum. A parallel referendum will take place in the Republic of Ireland on the same day. If both are successful, elections should be held to the new Northern Ireland Assembly before the end of June. Following the elections, the Assembly and the North-South Ministerial Council would operate in shadow mode, making the necessary preparations, until the main implementing legislation, which I intend to introduce as soon as possible, has been enacted and brought into effect.
The agreement reached on Good Friday is, I believe, a significant turning point in the history of Northern Ireland, but let us have no illusions. It will take a long time to repair the physical and the emotional damage of the past and bring about a real sense of reconciliation and partnership. The people there have suffered a great deal of hardship and pain. To their strength we must give all our support in the weeks and months ahead.
There will be pressures on all sides to bring the agreement down. The best way that we can help to fight those pressures is to give the agreement the overwhelming support of the House, and to give the people of Northern Ireland the chance to choose the future, not the past, in which to live. In the end, the decisions rest with the people of Northern Ireland. The choice is theirs.

Mr. Andrew MacKay: I congratulate the Secretary of State and her ministerial colleagues on achieving an agreement between the political parties and the two Governments. May I particularly praise the sensitive and understanding chairmanship of Senator Mitchell and his colleagues, which in no small measure resulted in the agreement.
I am grateful to the Secretary of State for acknowledging the significant contribution of my right hon. Friend the Member for Huntingdon (Mr. Major), his Secretary of State, Lord Mayhew, and my right hon. Friend the Member for Devizes (Mr. Ancram), all of whom worked tirelessly to achieve a lasting settlement in the Province, and without whose efforts we would not have heard the statement today.
The Conservative party warmly welcomes the agreement, but recognises that it is not an end in itself. It will not bring peace overnight, but it gives us the opportunity to build a lasting peace underpinned by stable political institutions that have the allegiance, and respect the rights and traditions, of all parts of the community.
For all of us, there are aspects of the agreement that do not sit comfortably with our aspirations and beliefs. Nevertheless, we believe that the agreement represents the best way forward for Northern Ireland. The Conservative and Unionist party strongly endorses the conclusion of the right hon. Member for Upper Bann (Mr. Trimble) that the agreement strengthens the Union. The Act of Union remains firmly in place, while the Irish territorial claim is


to be abandoned. At the same time, the agreement recognises the legitimate aspirations and interests of the nationalist community.
I have some questions for the Secretary of State relating to matters that are of legitimate concern not just on these Benches, but particularly in the Province. First, does she accept that it is highly likely that splinter groups could seek to bring down the agreement by the use of force? The Continuity Army Council, Republican Sinn Fein and the 32 County Sovereignty Committee remain implacably opposed to the agreement, as does the Loyalist Volunteer Force. Will she confirm that no security measures will be relaxed prematurely that cannot be reversed very quickly?
Secondly, we are naturally concerned about the lack of progress on decommissioning terrorist weapons. Will the Secretary of State confirm that no member of the new assembly will be appointed a Minister until his paramilitary associates have engaged in substantial decommissioning? Can that be incorporated in the forthcoming legislation, along the lines of the letter that the Prime Minister sent to the right hon. Member for Upper Bann?
Will the Secretary of State assure the House that there will be no early release of prisoners if decommissioning is not well under way? Can she allay fears in the Province by promising today that prisoners will not be released early if their parliamentary associates resume violence in any shape or form, and that, in the case of those released, their licence will be revoked if such violence resumes? Will she reconsider the case of Guardsmen Fisher and Wright in the light of these developments?
Thirdly, does the Secretary of State agree that it is the brave men and women of the Royal Ulster Constabulary, supported by the armed forces, who have stood between the rule of law and anarchy for the past 30 years? The RUC deserves our continuing praise and support. Therefore, will the Secretary of State confirm that any changes in policing will be made only after widespread consultation, on the basis of the broadest possible consensus?
Finally, will the Secretary of State accept that we are pleased that the Prime Minister has today taken up the suggestion of my right hon. Friend the Leader of the Opposition that the two of them, together with the leader of the Liberal Democrats, should speak together on a "yes" platform during the forthcoming referendum?
This is as inclusive an agreement as is ever likely to be achieved. It is a crucial development in the history of Northern Ireland, upon which we hope all sides can build. The next step is to secure an overwhelming yes vote on both sides of the border in the referendum on 22 May. After all the horror, disappointments and false dawns of the past 30 years, this is perhaps the best opportunity that we shall ever have to secure a new beginning for Northern Ireland. Let no one be in any doubt that we in the Conservative party will do all in our power to ensure its success.

Marjorie Mowlam: In answer to the hon. Gentleman's last point, yes, I welcome the cross-party support for the referendum. I make it clear that we are not financing one side over the other. That fact must be put on record, as other hon. Members have raised that point. We are

providing free leaflets to every house on behalf of all parties that received support in the May 1996 elections, whether they are campaigning for a yes or a no vote. There will be no imbalance for the parties within Northern Ireland.
I have no difficulty in supporting the tribute that the hon. Gentleman paid to the RUC. I have stated on many occasions that the RUC has demonstrated enormous bravery over the past 30 years. As I said earlier, when praising the RUC, we must not forget the families and friends who are living without loved ones or with very injured members of that force. It is important to remember that point, and I am very pleased to put it on record.
No one is seeking change unless there is a peaceful situation. We know that the first job of any Government is to ensure the security of the people they govern. We have 13,000 police and 17,000 troops in Northern Ireland. During past ceasefires, we and the previous Government de-escalated in response to that situation. However, we were flexible enough to return to our former position when the situation demanded it—we have no difficulties on that front.
I know that the police in Northern Ireland will, after consultation, want to work as a police force in a normal society that is not faced with terrorism. The police want to represent the whole Northern Ireland community, in both make-up and behaviour. That is the crucial point to remember.
As to the early release of prisoners, I hope that I made it clear to the hon. Gentleman that several security safeguards are built into the agreement. I am sure that he and his colleagues understand that, according to the nature of the agreement, several things must happen in parallel in order to build confidence. That has always been the situation, whether it be decommissioning, the release of prisoners, changes to the police force or normal acts of governance.
We have just announced assistance of £33 million in addition to the school building programme in Northern Ireland. Introducing such measures alongside one another is crucial to normalising the situation in the long run.
The hon. Gentleman knows that it is difficult for me to say a lot about Fisher and Wright, as, like my predecessors, I have a semi-judicial role in that decision. As Mr. Fisher and Mr. Wright were convicted of scheduled offences, they will be able to benefit from the review and from any other proposals that are on the table. As the hon. Gentleman knows, their cases are up for review again in autumn this year.
Like the hon. Gentleman, I would like to see decommissioning tomorrow. I would like it to happen forthwith, as the Prime Minister said at the end of the week of the talks, and as we have said on numerous occasions. The mechanisms that will make decommissioning possible are in place. The Prime Minister's letter to which the hon. Gentleman referred said not only that decommissioning should start immediately but that he would like to put in place mechanisms to enable a review some months into the process, to ensure that all the machinery was working. It is built and structured in such a way in the agreement that it represents mutually assured progress or mutually assured destruction. That is why I am hopeful, and that is why I believe that the decommissioning that we would all like to see is crucial.
The hon. Gentleman asked, in the context of decommissioning, whether Ministers would be able to serve. It is clearly stated in the agreement that Ministers have to sign up to the principles of a democratic and peaceful way forward. That is a crucial step for anyone who seeks to be a Minister in the assembly.
Built into the agreement is a cross-community mechanism. If people are not fulfilling their responsibilities and commitments in the assembly, there can be sufficient cross-community support within it to ensure that ministerial jobs can be withheld from those concerned. A review mechanism will be implemented six months in, to ensure that all the bits of the process are working.
The hon. Gentleman's first point was about splinter groups. As he will be aware, they have been a continual problem during the talks process. The Loyalist Volunteer Force, the Continuity IRA and the Irish National Liberation Army have been a particular problem. They will not go away after what I hope will be a successful referendum vote. They will still be there. It is a credit to the people of Northern Ireland and to the parties to have kept going when there are people there murdering, maiming and trying to destabilise the best chance they have not to go back to the past but to live for the future.
I hope that we get a good enough vote in the referendum. I have said that we are not campaigning one way or the other, but I have not worked for a year to get a no vote. I think that a positive yes vote in the north and the south is the biggest message that we can give the groups to which I have referred. That message is that they have no future with their present behaviour in Northern Ireland.

Mr. Paddy Ashdown: The Secretary of State will have received enough plaudits, well justified and well deserved, from enough quarters not to need me to add to them.

Marjorie Mowlam: Do, please.

Mr. Ashdown: I suppose that one can never get too many plaudits.
As someone who is proud to call himself a Northern Irishman—born and brought up in the north of a divided family, and having served on the streets of Northern Ireland as a soldier—I can say that the right hon. Lady, the Prime Minister and everyone else who has contributed to the agreement gave me, a week ago last Friday, the best day that I have had since I was elected to this place 15 years ago. It was probably the best day for me for the past 30 years, since the troubles started.
Of course I congratulate the Secretary of State. Her determination to do things differently, even against opposition and criticism, and the Prime Minister's determination not to accept defeat in the negotiations, were two significant contributions of a great number which the right hon. Lady listed.
There was the vision of the hon. Member for Foyle (Mr. Hume), without which, I suspect, the process would never have started. There was the courage of the right hon. Member for Upper Bann (Mr. Trimble), without which, I suspect, the agreement would not have existed, even today. A tremendous contribution was made by the previous Prime Minister. Also involved were the

Taoiseach and Senator Mitchell. All those individuals contributed, and I suspect that without any one of them, the success would not be here to be celebrated today.
I shall make three brief points. Surely it is right, as the right hon. Lady did in her statement, to reiterate that we do not have peace; it is merely the opportunity for peace, or the hope for peace. It is the foundation stone upon which peace can be built, but it is now up to the Northern Irish people to build upon it.
Secondly, is it not the case that the first major building block in the peace process comes with the referendums? All those who wish the process success can assist by obtaining the most decisive yes vote, both in the north of Ireland and in the Republic, in the two key referendums. If—if—it is the case that I or anyone else goes over to the north of Ireland to campaign on that basis and to assist in the process, I shall be happy to play that role. However, that involvement must be determined on whether it is helpful or not. This is an issue not of ceremony but of practical assistance.
Thirdly, in addition to decommissioning, is it not the case that other activity on the part of those who wish to see a success must make sure that words are followed by actions? Actions are necessary to reassure both sides. One of the absolutely crucial actions is the ending of paramilitary beatings. Does the right hon. Lady agree that it would be as unacceptable for them to continue as it would be for the private armies that have done Northern Ireland so much damage in the past to continue?

Marjorie Mowlam: I thank the right hon. Gentleman. I shall be quick; I do not disagree with a thing he says, and in the interests of other hon. Members who want to speak, I shall only say, "Thank you for your support, and thank you for the support of your party."

Mr. John Hume: rose—

Hon. Members: Hear, hear.

Mr. Hume: May I place on record our deep appreciation for the detailed work that the Secretary of State and her ministerial colleagues have done in arriving at this agreement? I am sure that, in so doing, I speak for the vast majority of the people of both sections of our community.
May I join her in thanking the Prime Minister for the priority that he gave to the greatest human problem facing the House? The fact that he gave it such priority gave enormous encouragement to the people at grass-roots level, who have suffered from this problem and strengthened the peace process enormously. I pay tribute to the Prime Minister for so doing.
I also pay tribute, and express deep gratitude, to the right hon. Member for Huntingdon (Mr. Major) and his colleagues, because they worked hard to help to lay the foundations for the process. I express my deep appreciation to him and to other hon. Members who are in the Chamber. I include in that the right hon. Member for Cities of London and Westminster (Mr. Brooke), because, when the history is written—I know a bit about the history of this process—his role and public statements will be seen to have laid a major foundation. I say to him, "Thank you." I add to that our thanks to the leader of the


Liberal Democrats, because he has been consistent in his total support for a common-sense approach to this problem.
It is welcome that the agreement will put in place institutions which will give no victory to either side in our community, but which instead will create circumstances that respect the identities of both sections of our community, in which they could work together in their common interests.
I have no doubt from my experience that, given the massive international good will that there has been towards the agreement, real politics will take over once we start working together and leave our quarrel behind us. Harnessing that international support and interest will transform our economy, and give hope to our young people, so that the next century will be the first in our island history in which there will be no killings on our streets and no emigration of our young to other lands to earn a living.

Marjorie Mowlam: I should like to make two quick responses. First, I put on record my thanks to the hon. Member for Foyle (Mr. Hume), who fought long and hard on this issue when it was not popular, which should be remembered by those who came along when it became more popular.
Secondly, the hon. Gentleman has brought something to the process over the years which is difficult to achieve in Northern Ireland—flexibility with words, which has helped tremendously. As I was preparing my statement, I picked out a phrase that he has used; he said that the future depends on the wishes of the people, not on institutions. The rethinking that he has brought to the process has also helped.

Mr. David Trimble: rose—

Hon. Members: Hear, hear.

Mr. Trimble: Without disagreeing with the introductory comments of the hon. Member for Foyle (Mr. Hume), I hope that the right hon. Lady and other hon. Members will forgive me if I do not repeat the thanks to everyone, but merely record my view that, without the actions of the Prime Minister in the last couple of days of the negotiations, no agreement would have been achieved.
I emphasise the right hon. Lady's comment that we should have no illusions. Considerable difficulties lie ahead, and there will no doubt be setbacks. I note with interest her comment that the British and Irish Governments have resolved their historical differences. That is important, because, while there will be developments within the structures that we shall put in place, this must be seen as a settlement, not as a milepost in the direction of some other eventual outcome.
On that point, is the right hon. Lady not concerned about the way in which Sinn Fein is acting with regard to this agreement? It has not endorsed the agreement. It says at the moment, if press reports today are to be believed, that, in the referendum, it will campaign in Northern Ireland for a yes, but in the Republic of Ireland for a no, and that, rather than endorse the agreement as a whole, it will attempt to cherry-pick some items of it and to ignore the obligations that it would place on Sinn Fein.
In that respect, does the right hon. Lady agree that it is important that the requirement that parties be committed to peaceful, democratic, non-violent means is not just a few empty words, but a genuine requirement that has to be satisfied before people can move into the Administration? It also underlines the need for the commitments to decommissioning again to be more than the empty words that they have so far been, and that action now is necessary.
With regard to the position on prisoners, as I am sure the right hon. Lady knows, that matter causes very great and very real concern in the community in Northern Ireland. The sentence review body will look at each prisoner on a case-by-case basis to determine eligibility for release. I should be grateful if she could give some indication as to the sort of criteria that the review body might be adopting, so that the public have some assurance that the circumstances of individual cases will be considered; the gravity of those cases does need to be taken into account.
In that context, I note that the Irish Government have already said that, irrespective of the release provisions, if people are found guilty of the murder of Garda McCabe, they will not be released. The contrast is bound to be keenly felt when people who have been guilty of murdering policemen in the United Kingdom are released.
May I again press the right hon. Lady on the question of security force prisoners? The case of the two guardsmen was mentioned, and of course I endorse the comments that were made about that by other Members; but there are quite a few security force prisoners, and I think that we should be doing more than just leaving their cases to be considered in the normal way, particularly as among those members of the security forces who are in prison—I think that he is now one of the longest life sentence prisoners—is a man who was unjustly convicted.
There is an innocent man in prison who was unjustly convicted of a murder. He was a member of the security forces, and a wide section of the community believes that, because he was a member of the security forces, he has not been given the sort of generous consideration that others have. The public's concerns on those matters need to be allayed.

Marjorie Mowlam: I thank the right hon. Gentleman for the kind remarks about the Prime Minister. I obviously echo them. For those three days, he worked flat out, and I am not sure that many others would have done that. The right hon. Gentleman also worked very hard in those last days to find an accommodation.
I agree completely that we have to bear it in mind that we should have no illusions in the next six months. We thought that it was tough up to Good Friday; we are going to have some tough days in the weeks and months ahead. However, we are starting from a different base. We are starting from the base of an accommodation based on consent, and we have to bear it in mind that the principles of consent and fairness that have governed us until now are in place in that historic agreement. I think that that is an enormous starting point.
I pick up the right hon. Gentleman's last point, on prisoners. I will, of course, look at individual cases, but I think it best at this point to take note of those. I am not unaware of the cases to which he has referred, but I should like to get the legislation in place first. There is a detailed


brief in the Library, but the details further to that will be available when the legislation, which is being drawn up now, is available to all hon. Members.
May I pick out the main point that the right hon. Gentleman raised about Sinn Fein and its non-endorsement of the agreement? In the talks last week, its members made it clear that they wanted to consult their party before they were prepared to make a definitive statement, but that they would be positive about the agreement. They were, and I think that they have been since then. I feel unable to comment on particular statements in the press-not because I do not always believe what the newspapers say but because I should like to read it for myself first, and get advice on what has been said.
I do not know whether Sinn Fein is going to cherry-pick the agreement, but I do know that most of the parties will, in their heart of hearts, cherry-pick. When we started n years ago, people were very far apart. We have reached a compromise on a structure—no one is signing up to 100 per cent., but, on balance, people are saying that it is the best agreement they can think possible, and that therefore they are able to support it.
I am not sure that I can go further than that, but I very much hope that Sinn Fein will join us in campaigning positively for an agreement. We have said all along that we want an inclusive agreement. It is only by inclusivity and bringing people into the process that we are going to stop the violence in the long term.
Finally, I support what was in the Prime Minister's letter, which is the basic position we hold on decommissioning. As we have said, it is an essential step to having a settlement that lasts.

Mr. Tony Benn: Is the Secretary of State aware that, when history records the agreement and a yes vote in the referendum, it will be not only the suffering in Northern Ireland that will come to an end but the suffering imposed on the people of the United Kingdom, because war in Ireland has caused great anguish and many casualties in this country, in England and Scotland as well?
I should like to ask one practical question. In annex A, a pledge of office is required for Members of the proposed assembly. When the legislation comes to be drawn up, will the Secretary of State consider whether anyone ready to give that pledge of office would also qualify, if elected, for membership of the House of Commons? It would be very hard if some Ministers in the Assembly were qualified to sit in this House and others were not. As she knows, it is an issue that I have raised many times—indeed, I introduced the Parliamentary Declaration Bill—and one that merits serious consideration when the legislation comes to be drafted.

Marjorie Mowlam: I thank my right hon. Friend. I agree whole-heartedly with his first point. It is useful to put on record the hard work of people such as Colin Parry from Warrington and Rita Restorick, whose son Stephen was the last man from the Army to be killed. They are people who have suffered on this side of the water, and, alongside the people of Northern Ireland, they have put great effort into making a difference.
On my right hon. Friend's second point, it is a matter best left to the House as a whole, not to me.

Mr. Tom King: Is the right hon. Lady aware that this is a very moving occasion for anyone who has had the privilege to hold office in Northern Ireland? I warmly congratulate her and the Prime Minister, and join her, if I may, in congratulating my right hon. Friend the previous Prime Minister and other colleagues who have played such a part in taking the process forward.
The right hon. Lady referred to two people who lost their lives—Private Restorick and one in Warrington—but she will understand that my mind goes back to so many people—those in the security forces and brave non-combatants in both communities—who, by standing for democracy and freedom against terrorism over the years, have made the agreement possible. I congratulate her on the achievement of bringing forward this agreement now.
I know from her remarks that the Secretary of State recognises that this is the end of the beginning, and that the real challenge comes now. There may be an agreement on paper, and an agreement may have been reached in smoke-filled or non-smoking rooms in Stormont, but it is with the hearts and minds of the people, expressed not just in a referendum but in a genuine determination then to make the new possibilities work, that the challenge will lie. I certainly wish her well, and, for my part, I am willing to do anything I can to help the process forward.

Marjorie Mowlam: I thank the right hon. Gentleman. I reinforce the point that his service in Northern Ireland was during one of the hardest, toughest times. I pay tribute to him for his service, and to the many people who, as he said, suffered during that time, many of whose names will never be known. When we were working on the late Friday night of the talks, I realised that I had been doing the job for 11 months, but sitting next to me were civil servants who had been doing it for 11 years. We should never forget to keep things in perspective.
I echo the right hon. Gentleman's last point. We can put the structures in place, but, as he rightly said, in the end it will be the people who will make it work or not. It is about trust and respect for each other. We cannot legislate for that—it takes years to build. There is a long haul ahead, but—call me naivex2014;I am still confident that, in the years ahead, the people of Northern Ireland will make it.

Mr. Clive Soley: In expressing my sheer delight at my right hon. Friend's achievement, I want also to ask her to bear in mind the principle that parole has always been available throughout the United Kingdom system to allow the early release of prisoners and to recall them if there is any danger of their committing another offence. That principle applies equally to the people in Northern Ireland, whether Unionist or republican, who have misguidedly believed that they could advance their cause through violence. That is the principle by which we should be guided, and the one for which I have argued for many years during this dispute.

Marjorie Mowlam: I thank my hon. Friend for the personal support that he has given me. I echo his last


Point. It is worth putting on the record the fact that, in the 1960s, the Stormont Government released prisoners, so this is not the first time that early release has been considered. Of course, if the remission scheme currently in place was the only scheme on offer, two thirds of prisoners would be out in two years, anyway.

Mr. Douglas Hogg: The right hon. Lady well knows that there is an explicit linkage in the agreement between the release of prisoners and the cessation of murder. That is welcome in so far as it goes. However, there is no explicit linkage between decommissioning and the release of prisoners; nor is there an explicit linkage between the appointment of the First Minister, his or her deputy, Chairmen of Committees or Ministers, and decommissioning and the cessation of murder.
Why is that? Are there, perhaps, side agreements or letters of comfort—for example, the letter from the Prime Minister to the right hon. Member for Upper Bann (Mr. Trimble)? If so, what are those side agreements, and would the right hon. Lady please put them in the Library of the House?

Marjorie Mowlam: There are no side agreements. The letter from my right hon. Friend the Prime Minister to the right hon. Member for Upper Bann (Mr. Trimble) is in the public domain—it has already been published. Does the right hon. and learned Gentleman want to see any other information? As he knows, I write to many Members of Parliament about Northern Ireland. The letter to which we have referred is the one that I believe to be relevant, and it has been published. There are no side deals, and there is nothing that is not in the public domain.
There is quite consciously no bartering of prisoners for weapons2014;no link between the two. All along, the Government have believed that that would be an unacceptable bargain to strike. All we have said is that a number of changes are necessary in the context of overall peace being the first step. If we have an overall peace agreement, other things will follow if there is to be change.
Everyone has to change—we have to change, the Irish have to change, and the parties have to change. We all have to adapt and find a future in which we can all live. There are no side deals and no bartering, but the early release of prisoners, changes in the police system, greater equality and a whole host of other things will follow as confidence, respect and trust are built among the people.

Mr. Seamus Mallon: I join colleagues in congratulating and thanking all those in this House, previous holders of office and the Irish Government for their efforts in obtaining this agreement—not forgetting the Minister of State, the hon. Member for Torfaen (Mr. Murphy). I want to claim a massive victory, because I think that the agreement is a massive victory. It is a victory for the political process over violence; of pragmatism over outdated ideologies. Above all, it is a victory of the human spirit, inspired by hope and confidence, over the twin imposters of hatred and bigotry.
I believe that the agreement should not be nit-picked or cherry-picked. I believe that it should not be seen as a victory for either Unionism or nationalism. It is a

comprehensive and common-sense set of arrangements that will allow people to be at peace with themselves, at peace with others, and united in the common purpose of resolving our differences only by agreement, only by consent and only through working together to lay to rest the ghosts that have divided us for so long.

Marjorie Mowlam: I thank the hon. Gentleman, and I echo his support for the Ministers who are seated on either side of me, who have done a lot of the hard slog to get us here.

Mr. Ian Taylor: The right hon. Lady deserves the praise she has received. She picked up the baton from the Conservative Government and twirled it, very successfully, with a style that was very much her own.
This agreement is very much in line with the principles which have held together the United Kingdom—democratic processes, consent and discussion. It is very important that the people of Northern Ireland, themselves and alone, have an opportunity to take a view on the outcome of the agreement and whether they wish to adopt it. Does she agree that we should warn those who wish to oppose the agreement that they should consider carefully the grounds on which they oppose it? Does she agree that those who wish to be part of the United Kingdom should remember that the rest of the United Kingdom would like a democratic future for Northern Ireland on the basis of the agreement?

Marjorie Mowlam: Frighteningly, I agree with everything the hon. Gentleman says, apart from his remark about twirling my baton—the marching season is not yet with us. Ultimately, the matter is in the hands of the people of Northern Ireland, and those who oppose the agreement should think hard about what the rest of the United Kingdom would like. They should consider also their opposition to it, because I should like to know their alternative—apart from going back to the dark days.

Dr. Norman A. Godman: I offer my thanks and congratulations to the Secretary of State for Northern Ireland on her remarkably fine performance in that difficult office. I also offer my sincere thanks to my hon. Friends in the SDLP, and to the right hon. Member for Upper Bann (Mr. Trimble), who has shown remarkable courage in recent days. We should thank also President Bill Clinton for his helpful contributions, although I believe that he should defer his visit until after 22 May.
It is my view that Scots Guardsmen Fisher and Wright should be given an early transfer to a prison in Scotland if, and only if, that is their wish. They committed an horrendous crime, but these two young infantrymen should be returned to Scotland. I hope that, in the near future, they will be released to their families and communities under licence.

Marjorie Mowlam: I thank my hon. Friend for his positive comments. A transfer for Fisher and Wright is available—all they have to do is apply. They have not done so yet.

Mr. Quentin Davies: Has any amnesty been offered against future prosecution of


crimes of violence in Northern Ireland? Does the right hon. Lady appreciate the profound disquiet—indeed, revulsion—which will have been aroused in the hearts and minds of all those who care about the impartiality and independence of justice by the fact that certain selective criminals should be offered premature releases as a result of the agreement? There are no political prisoners in this country. There are merely prisoners who have been convicted of greater or lesser crimes. The right hon. Lady is proposing the release of some prisoners convicted of the worst crimes.
What kind of signal does that send for the future—"If you kill one man, woman or child, you are a murderer, but if you kill enough people, you can negotiate a collective amnesty with the British Government"? What signal does that send to those who are in prison for lesser offences? Have they made a mistake by not associating themselves with some terrorist organisation? Does the right hon. Lady not appreciate the dangers of introducing into this country arbitrary justice and the politicisation of justice, which are the abnegation of justice itself?

Marjorie Mowlam: In response to the hon. Gentleman's first question, I tell him that there is no amnesty, collective or individual—that is not on the cards. He is entitled to his view, but it is not shared by the Government or those on the Conservative Front Bench.

Mr. David Winnick: In welcoming this splendid agreement, which represents the best possible future for Northern Ireland, should we not record—especially given the hostile question that has just been asked—that, during more than 25 years of sustained terrorism, neither the British public, in Northern Ireland or on the mainland, or the House wavered for a moment in dealing with terrorism? We have refused to give in to terrorism, and have always insisted that democracy should triumph. Should not that be a warning to future terrorist groups, who may believe that they can undermine the agreement or the yes vote for which we all hope?

Marjorie Mowlam: I thank my hon. Friend for that comment, with which I agree whole-heartedly. Labour Members, particularly my hon. Friend, have never been soft on terrorism—we have made our position clear time and again. The measures will not apply to anyone convicted after 10 April. We have put in place clear and specific regulations, and I think that we have dealt with the matter straightforwardly, honestly and up front.
There will be disagreements—some people will find the terms of the agreement distasteful, as the hon. Member for Grantham and Stamford (Mr. Davies) suggested. I say to those people that, in these difficult times, I have received more letters and phone calls from people who have lost family in the troubles, saying, "Yes, maybe we find it difficult, but this is our best chance to prevent other families from going through what we have been through. If that is the case, you should continue to do what you are doing."

Mr. Crispin Blunt: Will the Secretary of State turn her mind to the issue of Guardsmen Fisher and Wright? Many hon. Members do not accept that their conviction was safe or proper—and if we have to swallow

our distaste a at the early release of terrorist murderers to sustain the agreement, Guardsmen Fisher and Wright should be released without delay.

Marjorie Mowlam: I have explained the procedure to the House, and I think it best to leave it at that.

Kate Hoey: As a strong supporter of Northern Ireland's position in the United Kingdom, may I welcome the agreement? I congratulate my right hon. Friend and the Prime Minister, and I particularly congratulate the right hon. Member for Upper Bann (Mr. Trimble), who I believe has played a very courageous role—without him, we would not be where we are.
I urge my right hon. Friend to listen carefully to the 99 per cent. of people in Northern Ireland who are law-abiding, decent citizens; they find it very difficult to understand the release of prisoners. I think that they will accept it, but the issue must be handled very carefully—we must be as open and transparent as possible about the prisoners who will be released.
This issue could prevent the agreement from being successful, although I hope that it will not, and that the people of Northern Ireland will support the agreement. Nevertheless, I urge my right hon. Friend to treat the matter carefully, and to work as closely as possible with all the political parties, especially those constitutional parties that have campaigned so long and hard on the issue.

Marjorie Mowlam: I thank my hon. Friend for her contribution, and I echo her comments about the right hon. Member for Upper Bann. I acknowledge her position, which was not always popular in the party in opposition—however, she stood by it, and fought her corner hard, for which I respect her.
I do not in the least under-estimate the prisoner issue. It was included in the agreement as part of an overall settlement. The parties agreed to it—some unhappily, others more happily. I accept that people in Northern Ireland and here find the matter difficult, but, if one asks, "This is part of an overall settlement—should we do it?", the number of people who want us to proceed doubles. We must put the matter in context. No one wants to be the one standing here doing it, but most people accept that it is part of what a settlement will look like.

Mr. David Maclean: I recognise that, in the Secretary of State's words, there is a flexibility in the use of words in Northern Ireland—perhaps the most flexible phrase is "confidence-building measures". The terrorist groups see the release of their criminals as a confidence-building measure, but does the Secretary of State share my deep concern—and that expressed by the hon. Member for Vauxhall (Kate Hoey)—that the 99 per cent. of people who are the decent, law-abiding majority will not have their confidence built by the early release of some of the worst criminals in society, especially if arsenals of weapons are still available in Northern Ireland, and measures are taken that may damage the effectiveness of one of Britain's greatest and bravest police forces, the RUC?

Marjorie Mowlam: I say to the right hon. Gentleman, as I said to my hon. Friend the Member for Vauxhall


(Kate Hoey), that I accept that, for many people, this is a difficult issue. They are faced with building confidence, which means taking the violence off Northern Ireland's streets and not returning to history and the violence that it brings. On balance, and given time, even those who have suffered most think that it is worth doing. They do not want to be the people who do it, but they think that, in the end, it is worth doing. The referendum will be a chance for them to make their voices heard—it is there for people to voice that concern.
The judgment is difficult. Do we buy a package with which we do not agree 100 per cent., but which in the end has a chance to bring peace and save lives that might be lost in the years ahead? That is the judgment that people will have to make, and, given the option of preventing other people from going through what they have gone through, people will make that call. It is up to them, and it is not easy, but, as I have said, we have to look at the issue in the context of the fact that two thirds of these people would be out in two years, anyway. We are talking about 400 prisoners. Faced with that, and with the history of the past 30 years, let us make the choice.

Ms Margaret Moran: I assure my right hon. Friend that she has the whole-hearted support not only of the House, but, judging from the phone calls that I have received from my constituents in Luton, which she visited a year ago, overwhelming public support and a great deal of emotional support for the settlement. Many of my constituents and hon. Members welcome her earlier emphasis on fairness and opportunity for all. Could she clarify her response to the report by the Standing Advisory Commission on Human Rights, and say how its recommendations might be integrated in a final settlement in Northern Ireland?

Marjorie Mowlam: The question of fairness and justice and the SACHR report and equality is outlined in some detail in the agreement. It refers to our efforts to put matters on a statutory footing after the consultation in which we are currently engaged. The results of the consultation will form part of the final agreement.
When we have listened to people's views, we shall put on a statutory basis within the public service the obligation to bring about equality of opportunity in public services across the board in goods and services. An equality commission will set the objectives and carry out monitoring, and a host of measures will be attempted alongside targeting social need and Labour's new deal proposals to try to get to the long-term unemployed. They include twice as many Catholics as Protestants, but there are many unemployed male Protestants over the age of 40. We have particular projects in mind to try to address that matter, because that too is part of an overall accommodation.

Mr. John Bercow: I too congratulate the Secretary of State on this negotiating success, which will be widely welcomed throughout the United Kingdom and for which she as an individual deserves, and seems to have received, immense personal credit. Is she able to confirm that the independent body charged with the

review of sentences will be free from lobbying campaigns by one side or the other, by interested parties or by the British or Irish Governments?

Marjorie Mowlam: I have made it clear that the body will be independent. We shall appoint people to that end, and it, like the Parades Commission, will not be open to lobbying from any source.

Mr. Gerry Sutcliffe: I welcome my right hon. Friend's statement, and I congratulate her and her team on everything that has happened so far. As she says, we are at the starting point, and the next weeks will be vital. I hope that all hon. Members, regardless of party, will support the yes campaign.
On the vexed question of the release of prisoners, my right hon. Friend will know that I was involved in the case of Private Lee Clegg. I was exposed to the horrendous problems caused by the divide in Northern Ireland, and to the tremendous sensitivities about the release of prisoners. When the independent review board considers prisoner releases, I hope that it will be truly independent, and will acknowledge the sense of injustice on both sides of the divide in some very important cases.

Marjorie Mowlam: I acknowledge the work that my hon. Friend has done on the issue, and I hear what he says.

Dr. Julian Lewis: Like the Secretary of State, I hope that there will be a massive yes vote, but I strongly endorse the cautionary words of the hon. Member for Vauxhall (Kate Hoey) about prisoner releases. I draw the attention of the House to point 2 in the section on prisoners on page 25 of the agreement, which says:
Prisoners affiliated to organisations which have not established or are not maintaining a complete and unequivocal ceasefire will not benefit from the arrangements. The situation in this regard will be kept under review.
That makes it clear that prisoners will not be released on licence if their organisations continue to kill; but will they be recalled from release on licence if their organisations, rather than they themselves, resume killing?

Marjorie Mowlam: We made it clear in the statement, I hope, that individuals who are let out on licence will be recalled if they return to violence, and that organisations not on ceasefire will not be eligible. More detailed legislation is still being worked on for cases such as the hon. Gentleman mentioned. This week we shall lay a order for the referendum and an elections Bill, and legislation for the release of prisoners will be introduced in due course. We said that we would consult the parties and others on the question, and we shall certainly honour that pledge.

Mr. Andrew Mackinlay: I, too, congratulate my right hon. Friend and all the parties involved in this courageous settlement. When framing the legislation, will she consider whether it will be possible to avoid by-elections in the new assembly by using a proportional representation system that will allow any vacancy that occurs to be filled by the party that held the seat previously?
That is an important and sensitive matter, because, in the fragile incubation period of the new executive and the new assembly, with the apportionment of committees and


portfolios, there should be no possibility of a disruption in the arithmetic, allowing malevolent people to campaign and screw up the settlement, as happened at the time of Sunningdale. It would be legitimate, in the democratic process, to have legislation that avoided by-elections in the formative years of the new Assembly and executive.

Marjorie Mowlam: That is an interesting point, well worthy of consideration. I hope that we can consider such detail on Wednesday.

Mr. Laurence Robertson: Following the comments of the right hon. Member for Upper Bann (Mr. Trimble), will the Secretary of State return to the issue of Sinn Fein and its attitude? Sinn Fein has had every opportunity to endorse the agreement. Does she agree that it is stalling in order to have time to assess how far down the road towards a united Ireland the agreement will take it? Was not she chilled by the words of Sinn Fein's president? No sooner had he said, "Well done, David," than he was commending the work of the IRA, and saying that it had not been defeated by the agreement.

Marjorie Mowlam: I am not responsible for what other folk say. As I said earlier, the hon. Gentleman seems out of tune with his party's Front-Bench spokesmen. Sinn Fein representatives said that they would hold consultations with their party, and I assume that that is what they are doing. There is not much that I can do about it.

Mr. Tam Dalyell: Albeit that my right hon. Friend claims to have explained the procedures to the House and says that she is acting in a semi-judicial capacity, are not the cases of Fisher and Wright fundamentally different, in that those two young men were sent there by us on green Benches?
How can the Government be satisfied with the judges' conclusion that Fisher and Wright had no reason to feel that they were in danger? Was it not taken into account that their colleague, Guardsman Shackleton, was shot dead on the very same streets only a few weeks before? Having read the transcript of the trial, as I have done, does she not think that Fisher and Wright might have instantaneously understood the danger of coffee jar bombs and the whole "Come on!" trap scenario? Many ex-servicemen and, indeed, national servicemen, like me, feel, "There but for the grace of God went we!"

Marjorie Mowlam: I know how strongly a number of hon. Members on both sides of the House feel about this issue. I am afraid that all I can say in response, with a semi-judicial hat on, is that I have explained the procedures. Fisher and Wright were tried in court, and they had an appeal. As I said, we will certainly consider the issue.

Mr. Desmond Swayne: By linking the release of a prisoner to participation in a ceasefire by a particular faction, are we not establishing a dreadful principle—that there is a separate category of political crime?

Marjorie Mowlam: There is not a direct linkage. We are taking it as part of an overall peace settlement.

As hon. Members have said, that has happened in other parts of the world, and it is the way to try to find a new future for Northern Ireland.

Mr. John McDonnell: On that point, many hon. Members have made crude linkages between prisoners and decommissioning. Does my right hon. Friend agree that it is better for the process to be seen as more complex, and to see the release of prisoners in the context of rehabilitation of individuals and the whole community, and decommissioning in the context of the demilitarisation of the whole of the Six Counties? Is it not better that Sinn Fein should go through a thorough consultation process, so that its leadership has the overwhelming support of its membership for its position on the agreement?

Marjorie Mowlam: What we are after achieving is a normal society for everyone in Northern Ireland, which is what we are trying to do. On the prisoner issue, the proposed new tariff will result in two thirds being let out within two years—the present tariff is a half. We are suggesting that remission level with a date two years down the line.

Mr. Michael Connarty: First, can I attach myself to the congratulations to my right hon. Friend and her team, and particularly to say how proud we in Scotland are of our two Ministers from Scotland? Does she accept that, although we did not suffer in Scotland from bombing violence, we have been scarred deeply by the sectarianism which has plagued our community, because of the inability to move on the Northern Ireland question?
As we move forward on this path to reconciliation, my right hon. Friend will recall that I visited and spoke to people in Northern Ireland during the period of opposition, and the one word that came up continually was "intimidation". I have looked in the document under "Policing", and I do not see that word mentioned.
Can my right hon. Friend give us some reassurance that consultation and discussions will take place, so that the sub-structure to the paramilitary organisations, which are running a rule of law within their own community outwith the British rule of law, will be dismantled at the same time as decommissioning and the dismantling of paramilitarism?

Marjorie Mowlam: I thank my hon. Friend. We will be attempting, in response to the police, to change the present situation in which some areas of Northern Ireland are no-go areas, which is not satisfactory either for the police or for the local community. To change that situation, we will need trust and confidence building, and the best way to get those is to get a peace settlement so that the changes that we began to see in the police force under the last ceasefire begin to take place.
The best way to change the situation to which my hon. Friend referred is to get the representation of people across the communities. That is the point, and at the moment it is not possible. It will become so only with overall change, and through the whole peace process.

Mr. Brian White: I was an 11-year-old schoolboy in Belfast when the troubles


started, and I never thought that I would see what happened on Good Friday. History has been mentioned, and everyone in Ulster remembers their history selectively. I remember the Sunningdale agreement and what happened after it, when the Ulster Workers Council strike brought it down. Those voices have not gone away, although they are not here today.
I urge my right hon. Friend not merely to stand on the sidelines and put the agreement to the people, but to rebut and refute every allegation that parties outside the agreement make. I urge her to take on those people and make the argument for the agreement, as that is the only hope for the future of Northern Ireland. If we do not take this opportunity, I do not think that we will see another day like Good Friday in another generation. I urge my right hon. Friend to take on those voices of unreason, and rebut every argument they make.

Marjorie Mowlam: I hear what my hon. Friend says, and perhaps I was not completely clear earlier. Of course, when people say daft and nonsensical things, I will disagree—they are just not here for me to disagree with them this afternoon.
The precedents are there, and it is difficult in Northern Ireland. The only reason that I am being reticent is because it is about trust and confidence, and we do not build those by telling people what to do. They will happen in their communities when people read the document, which is what I implore everyone in Northern Ireland to do—to make up their own minds.
We will not necessarily achieve the sort of community that will build for the future itself, which is the way that it will happen, by going in in busloads and telling people

how to behave. That is not the way to build community support. Enough voices in Northern Ireland are disagreeing.
I have faith in those who want to build a safer, more positive and stable future, where economic growth could be phenomenal and the day-to-day issues that affect people's lives, such as health, education and jobs, will begin to change, as my hon. Friend will know, as he grew up there. We are not going to be wimpish about it, but I have one word of caution—it is their choice, not ours.

Mr. Dominic Grieve: I welcome the right hon. Lady's comments, and congratulate her on what she has achieved. One matter troubles me from what I have heard. Under the system under which early release will be achieved, the fact that particular organisations have announced that they do not support violence will be taken into account in allowing prisoners early release. How will she ensure that prisoners held for terrorist offences who are members of organisations that have not signed up to the agreement, or that may denounce it, do not consider themselves unfairly penalised by not being released and not having their cases considered?

Marjorie Mowlam: "Tough" is, I think, the short answer to that. If they do not sign up to the ceasefire, then they remain where they are.
To restructure the question and deal with a serious difficulty, a slightly harder issue to deal with is if they suddenly wake up one morning and say, "Whoops, I'm no longer a member of INLA, I've just joined PIRA." Those are difficult questions, which is why we are putting in place an independent body to assess them case by case, so that, when it does get difficult—it is problematic—the system is not used and abused. That is why we have been careful in the paper in the Library, and will be careful in the further details that will be provided, to ensure that it is not abused.

Business of the House

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): Following the statement of my right hon. Friend the Secretary of State for Northern Ireland, I should like to make a short business statement.
The business for Wednesday 22 April will now be as follows:
Proceedings on the Northern Ireland (Elections) Bill; followed by motions on the Northern Ireland (Entry to Negotiations, etc) Act 1996 (Referendum) Order, and the Northern Ireland (Entry to Negotiations, etc) Act 1996 (Cessation of Section 3) Order.
The business previously announced for that day will be taken at a later date. The business for the remainder of this week will be as previously announced.
The House may also wish to know that, subject to discussions through the usual channels, it is proposed that the business for Monday 27 April, Tuesday 28 April and Wednesday 29 April will be progress in Committee on the Finance (No. 2) Bill.

Mrs. Gillian Shephard: The Opposition are delighted to agree the progress of what we have been discussing for the past 80 minutes. That is welcome. I also thank the Leader of the House for agreeing to three days on the Floor to discuss the Finance (No.2) Bill, which we felt strongly about.

Mrs. Taylor: I am grateful to the right hon. Lady for her comments, and for the co-operation we have had in rescheduling the business for Wednesday, not only from the official Opposition but from other parties.

Mr. Andrew Stunell: I welcome the circumstances that have made the change in business necessary. It will have the full co-operation of the Liberal Democrats.

Mrs. Taylor: We are having much co-operation on the matter. 1 trust that it will be maintained, that everyone will share the good will that has arisen from the statement of my right hon. Friend the Secretary of State for Northern Ireland, and that we will be able to make early progress in the House to ensure that progress on peace is maintained.

Mr. Peter Brooke: Not having been in the House for the opening words of the statement of the Secretary of State for Northern Ireland, Madam Speaker, I was, under your very proper rule, unable to take part in the exchanges. I take this early opportunity of congratulating the Government on their achievement, the leaders of the political parties in Northern Ireland on their generosity

and courage, and the people of Northern Ireland on their resolution. I am delighted that we will be attending to this business on Wednesday.

Hon. Members: Hear, hear.

Mrs. Taylor: I am sure that the right hon. Gentleman will have a positive contribution to make on Wednesday and on other occasions. I think that some hon. Members try to catch your eye, Madam Speaker, even though they have not been here for statements. I am sure that, if others followed the lead of the right hon. Gentleman, the House would respect them the more for it. I hope that he was in the House to hear the tributes paid to his work in Northern Ireland.

Madam Speaker: The right hon. Gentleman was in the House to hear the very considerable tributes that were paid to him. Indeed, I thought that he had been here for the entire statement. Had he stood, I would have called him, although I would have been remiss in doing so.

Mr. John Swinney: Although I welcome the circumstances that have changed the business for Wednesday, they knock out the first day of the Report stage of the Scotland Bill. Can the Leader of the House say when she expects that business to be rescheduled?

Mrs. Taylor: I cannot give that decision today, but I hope in my business statement on Thursday to be able to cover the point.

Mr. Douglas Hogg: I am sorry to enter a dissenting note. As I understand it, the right hon. Lady proposes that the Committee stage and Report stage of Northern Ireland (Elections) Bill should be taken on Wednesday. That means that the House will go straight to the Committee and Report stages after Second Reading. Does she accept that that is in principle undesirable? I hope that she will allow some time to elapse.
The right hon. Lady will have noticed that we are talking about assemblies or parliaments for Scotland, Wales and Northern Ireland, but nothing for England. That highlights a question that those on the Government Front Bench will have to address.

Mrs. Taylor: I regret that the right hon. and learned Gentleman had to enter a dissenting voice. I should have thought that, given the nature of the business that we are discussing, it is desirable that we make as much progress as we can, as quickly as we can. It is not unprecedented to take Bills in this way. If we are all serious about wanting to make progress, which I believe is the general wish of the House, it is important that we take the Bill as speedily as possible.

WELSH AFFAIRS

Motion made, and Question put forthwith pursuant to Standing Order No. 107 (Welsh Grand Committee),

That the matter of the rural economy in Wales, being a matter relating exclusively to Wales, be referred to the Welsh Grand Committee for its consideration—[Mr. Dowd.]

Question agreed to.

Orders of the Day — Bank of England Bill

Lords amendments considered.

Clause 4

ANNUAL REPORT BY THE BANK

Lords amendment: No. 1, in page 3, line 5, at end insert—

("() The report mentioned in subsection (2)(a) shall, in particular, include a review of the Bank's performance in relation to its objectives and strategy, as determined by the court of directors of the Bank, in the financial year to which the report under this section relates.")

The Economic Secretary to the Treasury (Mrs. Helen Liddell): 1 beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Sir Alan Haselhurst): With this, it will be convenient to discuss Lords amendments Nos. 2 and 3.

Mrs. Liddell: These three amendments, which have come to us from another place, will ensure that the Bank's annual report contains details of its objectives and strategy and provide for the committee of non-executives to report specifically on them. The amendments reflect and enhance existing practice, and provide useful additional clarification of the role of the court and its sub-committee. I have pleasure in commending them to the House.

Mr. Michael Fallon: I am grateful to the Minister for explaining the background to the amendments. She said that they came to us from another place; it may help the House if I add that they came to us from Labour Back Benchers in another place. As the hon. Lady said, they usefully clarify the position.
Lords amendment No. 1 ensures that the Bank properly reviews its performance. May I ask who will lay down the objectives and strategy for the first year, which the Bank will not have been able to do before the enactment of the Bill—or do we take it that the Chancellor's correspondence setting up the new arrangements itself comprises the objectives and strategy?
Lords amendment No. 2 is self-evidently an improvement—such an improvement that I wonder why it did not occur to anyone in this place.
Lords amendment No. 3 is worth pausing over. It makes sense only if the Bank of England's report is published reasonably early in the financial year. Could the Minister help us by giving her interpretation of the phrase "as soon as practicable"? As I understand it, the Bank's report will include the accounts of the Bank of England. Many public bodies have to produce annual reports to the House that include their accounts and they sometimes struggle to get them in by end of July, when the House rises.
I hope that the Economic Secretary accepts that that is a little late in the day for us to see the statement of objectives and strategy for the forthcoming year. It may

be that they can be published in some other form. Under clause 12, the Treasury's specification for monetary policy strategy and objectives can be published at any time during the 12 months. If the hon. Lady can clarify the timetable and say when she expects the annual report to be put before Parliament, I am sure that we can wish the amendments well on their way.

Mr. Nick Gibb: Lords amendment No. 1 seeks to ensure that the Bank of England sets out its objectives and strategies and then prepares a report on its success in meeting them. I am delighted that the Government have accepted the amendment proposed on Report in the Lords. As my hon. Friend the Member for Sevenoaks (Mr. Fallon) said, I am surprised that it was not proposed by the Conservatives in Committee or included in the Bill as originally drafted. It is difficult to see how
the Bank's performance in relation to the objectives and strategy for the time being determined by the court
can be kept under review under clause 3(2) if there is no requirement to publish the objectives and strategy.
There is a big problem with the Bill's basis, because it takes from politicians key economic decision making in a vital area of economic policy and puts it into the hands of unelected officials. In such a case, it is the more important that every step in the decision-making process is catalogued and published so that people can see what is going on. It is more important that that happens when policy is determined by those who are unelected, because, if the policy goes wrong, there is no sanction against those officials—they cannot be turfed out of office by the electorate. As an alternative, the public must be able to see every step in the policy-making process. The setting out and publishing of strategies and objectives is a key element in achieving that.
It is important to remember that the translation of an inflation target into monetary policy is not a scientific, simple, formulaic matter. The conduct of monetary policy is as much an issue of public policy debate as the setting of the inflation target itself—indeed, I would argue that it is more political. There is a consensus on a low inflation target, but there is much less of a consensus on the means of translating that target into monetary policy. The amendment should ensure that the Bank of England publishes not only its objectives and strategies for running itself on a day-to-day basis, but a statement of how it believes monetary policy should be conducted.
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Clause 16 specifically states that the directors of the Bank
shall keep the procedures followed by the Monetary Policy Committee under review.
That is therefore specifically to be included in the functions to be carried out by the directors as set out in clauses 2 and 3, and is to be part of the annual report required under clause 4. It is logical that the amendment should also apply to the review of the Monetary Policy Committee and therefore to the conduct of monetary policy. I should be grateful if the Economic Secretary could say whether that is the purpose of the strategy and objectives that are to be required to be published. Will they contain details of the Bank's general strategy on how


to conduct monetary policy—how it intends to translate an inflation target set by the Chancellor and the Treasury into day-to-day monetary policy?
Samuel Brittan, in giving evidence to the Treasury Committee, said:
Monetary economics is not a hard science.
In his evidence, Lord Eatwell said:
there is a tendency in monetary policy matters to regard certain propositions as 'obvious' and anyone who questions such propositions to be at best a nit-picking academic and at worst a crank. Yet the notion that the theory of monetary policy is 'obvious' and 'pragmatic' is belied by the fact that the theory and practice of monetary policy has undergone quite radical revisions over the past 20 years. If views held 10 years or 15 years ago were so obviously right then, why are they so obviously wrong now?
The Bank of England should use the disclosures required by the amendment to spell out its latest thinking on what constitutes best science or best practice in the general conduct of monetary policy. The public, academics and general policy debate can then examine the Bank's propositions to determine how far they are proved correct with the passage of time.
One of the other great paradoxes and difficulties in the Bill could be eased if we were to include in the required statement of strategy some explanation relating to the inherent conflict between the Bank's conduct of monetary policy and the Government's conduct of fiscal policy. The problem with separating those functions is that, by passing control of inflation to an outside independent body, the Government could conduct a loose fiscal regime and leave the Bank of England to deal with the inflationary consequences. Indeed, some have argued that such has been the Government's record over the past 11 months. The amendment should enable the Bank to set out how it would or did respond to the Government's fiscal policies.
That would have two distinct advantages. First, it would enable the public to see the consequences of the Government's fiscal policy in terms of interest rates, mortgage rates and so on. Secondly, it would enable public policy debate to take place on the issue of whether the Bank was adopting the correct strategy in dealing with fiscal policy changes implemented by the Government. The Bank's performance will be judged at the very least principally—and probably almost entirely—by the success of its conduct of monetary policy and therefore the success or failure of the members of the Monetary Policy Committee. I hope that the amendment will enable the Bank to set out, in as much detail as possible, its strategy and objectives on the conduct of monetary policy.
Important matters relating to the conduct of exchange rate policy also need to be spelled out in any statement of objectives and strategy. The key role in the conduct of an exchange rate policy rests with the Treasury and, as with fiscal policy, it is important that the Bank sets out how it has dealt with what it perceives to be the Government's exchange rate policy. In addition, the Bank itself has some role in the implementation of exchange rate policy.
Such an approach is important for two reasons. First, it would enable the public to assess how the Bank has dealt with and responded to the Government's exchange rate policy and, with the passage of time, to decide whether that was the correct approach. Secondly and equally important, it would enable people to see what effect the Government's exchange rate policy had on the conduct of monetary policy by the Bank—in other words, the effect on mortgage and interest costs.
The Bank should also set out what it perceives to be the consequences for the exchange rate of its own conduct of monetary policy. That would help to expose the absurd situation that might occur if the Government pursued a policy of reducing the value of sterling by selling it into the market and, simultaneously, the Bank raised interest rates to reduce the money supply artificially increased by the Government.
Throughout the Committee stage, Conservative Members tried to obtain from the Government an explanation of how such conflicts would be resolved. Which policy will take priority: fiscal or monetary; exchange rate or inflation target? The Government refused—or, rather, were unable—to give an answer. The amendment might do what the Government could not, and help to make the issues transparent.
A further conflict that the amendment will help to make apparent to the public relates to the Treasury's debt management policies. Whether or not the Government finance debt through a fully funded method will have an enormous impact on the money supply figures. In his evidence to the Select Committee, Professor Tim Congdon explained in great detail that debt being fully funded or not will have a specific and direct effect on the money supply. The Bank should set out in its strategy and objectives how it will respond to the method of debt funding pursued by the Government. Again, that will enable analyses to be undertaken of whether that approach is correct and, with hindsight, it will enable the public to see the effect of Government debt management policy on the level of interest rates.
The amendment, accepted by the Government, should be used to create much greater transparency not only in the management of the Bank but in the far more important question of the performance by the Bank of its key function of managing monetary policy in general. The minutes of the Monetary Policy Committee go some way towards achieving that, but more general objectives and strategies set out in full, assessed in the light of experience, debated and discussed will do much to bring an element of democracy into what is, in essence, an undemocratic Bill.

Mrs. Liddell: I am glad that the hon. Member for Sevenoaks (Mr. Fallon) sees the common sense of the approach taken, because it fits in with our debates on Second Reading and in Committee. I welcome the hon. Gentleman to today's debate, as he was not with us in Committee. I hope that he will pass on to the hon. Member for Daventry (Mr. Boswell), who was with us, our good wishes to his family, about whom the Committee heard a great deal—which may have been a sign that it took the Conservatives some time to get into their stride in relation to the Bill.
I take up the specific point that the hon. Member for Sevenoaks made about who will set the Bank's strategy and objectives. As clause 2(2) says, the court as a whole will set out what that strategy is; we had a lengthy discussion in Committee on how that would be achieved. Indeed, the Chancellor mentioned the subject in his statement on 20 May 1997.
The hon. Member for Sevenoaks suggested that it might be possible to hold a debate on the Bank's annual report and strategy. On 20 May last, the Chancellor of the Exchequer specifically said that it would be desirable for


the Bank's annual report to be debated in the House. The Treasury Committee, in its report on accountability of the Bank of England, also recommends that there should be a debate.
The hon. Member for Sevenoaks asked about this year's timetable for the annual report. The Bank's financial year ends on 28 February, and usually an annual report is available by the end of May or the start of June. We are aware of no reason to deviate from that timetable or for the Bank to deviate from it. The Government look forward to a debate in the House soon after, but I am sure that the hon. Gentleman, as an experienced parliamentarian, would not expect me to involve myself in the issue of when the House will have an opportunity to debate these matters; such issues are a matter for the usual channels.
As the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) is a great fan of recycling, I am glad that he had an opportunity to recycle his speeches from Committee and from Second Reading. It is always interesting to listen to him, although one does not necessarily agree with all that he says. It will be for the court to determine the contents of the annual report. Extensive correspondence between the Chancellor and the Governor of the Bank of England has been published, as have memorandums of understanding between the Government and the Bank. There has been extensive debate in this place and elsewhere, and I am sure that the court will take into account many of the points raised.
The Government welcome Lords amendments Nos. 1, 2 and 3, which provide useful clarification. They very much fit the Government's strategy, which is in favour of greater transparency, and greater clarity of operation, of the Bank. It is useful to have greater clarity of legislation as well, so I commend the amendments to the House.

Lords amendment agreed to.

Lords amendments Nos. 2 and 3 agreed to.

Clause 12

SPECIFICATION OF MATTERS RELEVANT TO OBJECTIVES.

Lords amendment: No. 4, in page 5, line 30, leave out ("the House of Commons") and insert ("Parliament")

Mrs. Liddell: I beg to move, That this House doth agree with the Lords in the said amendment.
The amendment would require any notice defining price stability or the Government's economic policies to be laid before the Lords as well as the House of Commons. It is about openness and about accountability to Parliament, so it should be welcomed.
I take the opportunity to draw to the attention of the House the written answer given earlier today by my right hon. Friend the Chief Secretary, in which he announced the Government's response to the consultation on cash ratio deposits. Copies have been placed in the Libraries of both Houses. The Government have decided that the initial CRD scheme should apply a zero rate to eligible liabilities up to £400 million and 0.15 per cent. to eligible liabilities over £400 million.
In relation to the amendment, there is no reason why the House of Lords should be excluded from receipt of the Government's notice—it will be publicly available anyway. The amendment clarifies that point; I commend it to the House.

Mr. Fallon: I am grateful to the Minister for that explanation and for her welcome, although she may have forgotten that I participated on Report, when I specifically drew attention to the issue of cash ratio deposits. It might have been helpful—I know that these things are difficult—to have copies of the Chief Secretary's written answer and details of the scheme before we started to consider the amendments. However, we look forward to receiving that—at some stage later today, presumably.
We welcome Lords amendment No. 4. The Minister said that the inclusion of the other place among those before whom any notice should be laid was a matter of openness and accountability; it also sounds to me like second thoughts and an improvement to the Bill. None the less, we welcome it.

Lords amendment agreed to.

Clause 13

MONETARY POLICY COMMITTEE.

Lords amendment: No. 5, in page 6, line 8, at end insert—

("() Of the four members appointed under subsection (2)(c) one shall be appointed on the advice of the First Minister of the Scottish Executive.")

The Chief Secretary to the Treasury (Mr. Alistair Darling): I beg to move, That this House doth disagree with the Lords in the said amendment.
The Bill sets up the Monetary Policy Committee, whose job it is to set interest rates in order to meet the Government's inflation target. It is worth noting that our long-term interest rates are the lowest that they have been for some 33 years.
During the Bill's passage through the other place, an amendment was moved by Lord MacKay of Ardbrecknish to the effect that one of the four members of the Monetary Policy Committee appointed by the Chancellor of the Exchequer should be appointed only after receiving the advice of the First Minister of the Scottish Parliament.
When the Government expressed their intention to set up the Monetary Policy Committee, we said that the members of that committee would be chosen because of their skill, because of their reputation and because of their ability to reach decisions as to the appropriate levels of interest rates for the whole of the United Kingdom.
We recognised that there was anxiety—which has continuedx2014;that the Bank of England should have regard to the, sometimes varying, economic conditions in different parts of the United Kingdom. As I shall explain shortly, we have drawn the Bill in such a way as to ensure that the court of the Bank of England has a specific duty to monitor the way in which the Monetary Policy Committee discharges that duty and, in making our most recent group of appointments to the court, we have responded to many of the legitimate concerns reflected by


Lord MacKay and others who spoke in support of his amendment. Indeed, those concerns were acknowledged by Lord McIntosh of Haringey in another place.
I have taken the trouble of reading what Lord MacKay and others said. Some of the arguments were advanced tongue in cheek, and the Government defeat by a majority in the other place was something of a tea-time raid. Interestingly, the Conservatives in the House of Commons, and presumably the nationalists—I see one member of the Scottish National party in his place—are jumping on a bandwagon being pushed by an odd group of Conservatives and hereditary peers, who, as I understand it, oppose the Monetary Policy Committee in principle.
I am bound to say, with due respect to Lord MacKay, that, excellent man though he is, I do not recall that, when he was a member of the previous Government, he ever advanced the view that conditions in Scotland were different from those anywhere else in the United Kingdom, and that any regard should be had to what Scots opinion might be on that or any other issue. However, I recognise that politics is what it is; the Conservative hereditary peers took the opportunity to put one over on the Government. I do not think that the arguments that they advanced for the amendment have any merit whatever.

Mr. Gibb: The right hon. Gentleman has said that the Government defeat was the result of Conservative hereditary peers voting against them, but the actual results—93 contents against 90 not contents—show that the Government lost by only 3 votes. As The Times said today, the laziness of the working peers appointed by the Labour party was responsible for the Government's defeat.

Mr. Darling: I dare say that in we shall soon have plenty of time to debate the workings of the other place. The fact remains that more than half of those who voted against the Government were hereditary peers. On practically every occasion when the Government have been defeated in the other place, it has happened only because of the voting strength of the hereditary peers—who tend to support the Conservative party.
The scheme of devolution that we have proposed and that will result in a Scottish Parliament proceeds on the principle that power will be devolved unless it can be more effectively discharged by the United Kingdom Parliament. Economic matters, particularly monetary policy, are not devolved, for the simple reason that there is only one currency in the United Kingdom, and it is difficult to see how monetary policy could be conducted on anything other than a UK-wide basis.
Although there are undoubted regional variations in economic performance, the fact is that it would be very difficult to operate monetary policy in any other way. That is why economic matters and monetary policy have not been devolved. Scotland will remain part of the UK. We do not propose a separatist solution, or a federalist solution of the type that the Liberal Democrats would like at some stage.
We believe that the monetary policy committee must reach its policy decisions having regard to what is good for the whole of the UK economy. Indeed, it would be very difficult to do otherwise. Economic conditions in

different parts of Scotland differ greatly. There is evidence of significant overheating in the Edinburgh housing market, but the same cannot be said of Wick. Economic conditions are also quite different in Edinburgh and Glasgow, only 40 miles apart.

Mr. John Swinney: rose—

Mr. Darling: Clearly the hon. Gentleman anticipates that my arguments will not agree with his view—which is that Scotland is completely different from England, and that economic conditions everywhere in Scotland are exactly the same. That view of the modern economy is economically illiterate.

Mr. Swinney: The Chief Secretary is entitled to his definition of economic illiteracy. Does he accept that interest rate policy in the United Kingdom should be influenced by the fact that house prices in the south of England have in the past 12 months increased by more than 12 per cent., while in Scotland they have fallen by 1 per cent? Should that not have some bearing on any decisions taken by the Monetary Policy Committee?

Mr. Darling: I can speak with some feeling when I tell the hon. Gentleman that that is certainly not true of Edinburgh, where house prices are rising dramatically.
I recognise that the hon. Gentleman's constituency is not the same as Edinburgh; nor is the constituency of his hon. Friend the Member for Angus (Mr. Welsh), who has just joined us. While there is undoubtedly pressure on house prices in the south-east of England, the same cannot be said of parts of the north-east of England. The point is that inflationary pressures are, and will be, different in different parts of the UK, but it is necessary to take an overall view. Not even the nationalists would argue for a different monetary policy for each county or district. Interest rates need to be set to achieve inflation targets for the whole of the United Kingdom.
I remind the hon. Member for North Tayside (Mr. Swinney) that his party is in favour of Scotland, or the United Kingdom, joining the European single currency. Interest rates will then have to be set for the whole of Europe, never mind the United Kingdom. It is therefore somewhat inconsistent to maintain that Scotland should opt out.
In any case, that is not what the amendment would do. It acknowledges that there is concern, and that the Monetary Policy Committee should have regard to the differing economic conditions in different parts of the country, but we had anticipated that. Under the old system, the criticism was that the Bank of England sometimes gave the impression that it did not acknowledge the problems experienced by different parts of the UK.
That is why the Bill makes it clear that one of the duties of the reformed court of the Bank of England will be to keep under review the way in which the Monetary Policy Committee reaches its decisions and collects the regional, sectoral and other information on which it is necessary to base them. Clause 16 lays that down; I am sure that if hon. Members have not read it, they will do so now. The Lords amendment is not necessary, because of the safeguard that we have inserted in the Bill.
We said before the election that we thought that the court ought to be more reflective of the differing interests of the whole of the UK. We made the latest group of appointments in February; hon. Members will be aware that, for the first time ever, there are now individuals on the court representing interests in Scotland, Wales and Northern Ireland. Jim Stretton, chief executive of the Standard Life assurance company and well respected in Scotland, has been put on the board. In anticipation of his appointment, he has already taken steps to ensure that conditions in Scotland are made known to the Monetary Policy Committee and to other members of the court.
Graham Hawker, chief executive of Hyder, has also been put on the court. He has been a director of Welsh Water for more than a year, and is well known in Wales. We have also appointed Roy Bailie from Northern Ireland, who is not only a former chairman of the Northern Ireland tourist board but was chairman of the CBI in Northern Ireland between 1992 and 1994. Another appointment is Bill Morris of the Transport and General Workers Union—unlike the former Government, we have no aversion to including people from the trade union movement on the court of the Bank of England. He will lend his experience, and that of people involved in manufacturing industry, to the process. There is also Sheila McKechnie from the Consumers Association.
All those people are examples of the Government's willingness to broaden the base of the court of the Bank of England. As we make further appointments over the next few years, we shall ensure that the court has a wide base throughout the whole country. Under the terms of clause 16, the Monetary Policy Committee will thus be enabled to reach decisions that will be good for the whole UK.
The Lords amendment was an attempt to make mischief. Their Lordships are of course entitled to take advantage of their opportunities. The matter was never raised in Committee or on Report, which suggests that Opposition Members did not feel strongly about it at the time.
Above all, the amendment is not necessary. The Chancellor of the Exchequer appoints members of the Monetary Policy Committee on the basis of what he believes best for the whole of the country, not just one part of it. The reforms that we have made to the court, and the people whom we have put on it, will ensure that the interests of Scotland and other parts of the UK are taken into account. The amendment should be rejected. It was an unnecessary bit of mischief making, which adds nothing to the Bill.

Mr. David Heathcoat-Amory: Although the amendment comes from another place, it fits well with the concerns expressed about the Bill in the House and in Standing Committee, and particularly with worries expressed on both sides of the House on occasion about the powers and composition of the Monetary Policy Committee. The Chief Secretary has just reminded us that the court of directors of the Bank of England is drawn from a wide spectrum of experience and backgrounds, but that is not the point.
We are discussing the Monetary Policy Committee, which is the decision-making committee that determines interest rates, and therefore affects mortgage holders,

businesses and anyone who borrows or lends money. It affects people and businesses not just directly, but through its effect on the exchange rate and its influence on economic policy generally. The importance of the amendment reflects the central importance of the Monetary Policy Committee.
Anyone who doubts that has only to look at what has been happening in the past few months, when the committee has been setting interest rates. There is an almost even split on the committee between those who want to leave interest rates where they are and those who want to put them up. It has been the job of the Governor of the bank to cast his vote, in those cases against a rise.
5.30 pm
That is not an altogether happy situation. It has not brought certainty and stability, because of the widespread view that another rise in interest rates is inevitable at some point. That is what the markets anticipate, and it has contributed to the strength of sterling and the consequential damage to industry and exporters. The Chancellor of the Exchequer says that the matter is nothing to do with him. He has washed his hands of the whole affair and says that it is now the job of the Monetary Policy Committee.
It is beyond dispute that the committee is extremely important. The issue of who is appointed and how members are appointed is equally important. In Standing Committee and on Report, we examined the case for confirmatory hearings, which would be one way of giving the House and hon. Members an input into appointments to the committee. The idea of confirmatory hearings came from the Treasury Select Committee, which of course has a Labour majority and a Labour Chairman. The House divided on Report on the Committee's suggestion to implement confirmatory hearings, although, mysteriously and regrettably, the Labour members of the Committee, having proposed the amendment, all disappeared when the House divided. We lost the vote, but we won the argument.
Confirmatory hearings would have been a good idea. The powers of patronage enjoyed by the Chancellor of the Exchequer are very great—possibly too great. He directly or indirectly appoints all the members of the Monetary Policy Committee. Not only do the appointments give him that power, but the term of appointment is short. Members are appointed for only three years. In comparison with other central banks, that is a very short term. Members of the Bundesbank are appointed for eight years, and those serving on the Federal Reserve bank of the United States serve for 14 years. That is done deliberately to give them a degree of independence from the Executive, which gives members and their committees credibility in the markets.
The three-year term for which the Chancellor has opted means that committee members can be sacked or reappointed within the term of one Parliament. If they are politically inconvenient or defy the Government's monetary policy, it is possible to get rid of them in short order. That concerned hon. Members on both sides in Committee and on Report. We tackled the issue in various ways. Amendments were moved not just to institute confirmatory hearings in line with the Treasury Select Committee's proposal, but to give members of the committee longer terms of appointment, and to require


fuller minutes, which would give the views of the members of the committee to the public and to the markets.
We also thought that the pay of at least some committee members should be related to performance, and we proposed an amendment to require the Monetary Policy Committee to report on any developing split between monetary and fiscal policy, which was rather a perceptive amendment in view of what has happened since then, as there is now a clear divergence between monetary and fiscal policy, which is one reason why interest rates have had to go up five times since the election, with consequential damage—

Mr. Deputy Speaker: Order. The right hon. Gentleman is straying outside the precise terms of the Lords amendment before us, which is about Scotland.

Mr. Heathcoat-Amory: I never wish to defy you, Mr. Deputy Speaker, so I shall return briskly to the amendment. I wanted to remind the House of the importance of the Monetary Policy Committee, the way in which it is appointed and who serves on it, and the measures whereby we tried to improve that.
It took the other place successfully to pass an amendment, which was moved by my noble Friend Lord MacKay. The amendment would give the First Minister of the Scottish Executive, when he is in place, the right to advise on one of the external appointments. It arose from what was by any standard a good debate in another place. I was disappointed by the way in which the Chief Secretary dismissed the amendment on the ground that it was simply voted through by hereditary peers. If he studied the debate, as he said he had, he would agree that it was the quality of debate that was important.
The amendment tackles many of the points on which I have been digressing. First, it widens the appointment procedure. By making one of the appointments dependent on the advice of the First Minister, it takes at least some of the monopoly of patronage away from the Chancellor of the Exchequer, although it still gives him considerable latitude. The First Minister might suggest a number of candidates, from whom the Chancellor could choose. In any case, the person appointed in this way to the Monetary Policy Committee is not required to be resident in Scotland or even to be a Scot. It could be someone temporarily working in Scotland with experience elsewhere, or a Scot who might have an appointment or be working in a business south of the border.
The amendment allows complete discretion, but gives another input into the selection procedure. It therefore introduces—this is the second point—an element of devolution. The present appointees on the Monetary Policy Committee come exclusively from the south-east of England, or at least the southern part of the country. They are all splendid people with a great deal of experience. There is no criticism of them but, as has been noted, they all come from a triangle that links Oxford, Cambridge and London. It would strengthen the Monetary Policy Committee and its credibility in the markets if one of its members came from another part of the country or was appointed by someone from another part of the United Kingdom, and had a different perspective on the decisions to be taken.
In resisting the amendment, the Chief Secretary suggested that Scotland would be treated differently from England. That is not the case: it is not the decision that

would be devolved to Scotland, but the appointment of one of the people on the committee that takes the decisions. I can think of no better place to devolve that appointment. Scotland is the birthplace of perhaps the greatest ever economist, Adam Smith, and I am sure that there are other people in the present day of similar calibre. Edinburgh has a very large financial sector and its banking system is distinct from that of England.
For those reasons, I believe that the amendment deserves support. Anticipating the Liberal Democrats' contribution, let me say that I cannot support their idea of widening the measure to allow for an appointment from each constituent country of the United Kingdom. I think that the Liberal Democrats wish to see one appointment from Wales, one from Northern Ireland and one from Scotland, which would leave only one appointment from England. That would introduce a wholly unnecessary degree of federalism and is perhaps another example of the Liberal Democrats' adopting someone else's idea and making it unworkable. I note in passing that the idea of a Scottish appointment is supported by the Scottish Trades Union Congress—

Mr. Ross Cranston: If this is such a great idea, why did the right hon. Gentleman not mention it before in the House or in Committee when we discussed the matter at great length?

Mr. Heathcoat-Amory: The hon. Gentleman has attended the debate for only the past few minutes, but he will have heard me list the alternative amendments that we pressed upon the House. I regret that the hon. Gentleman apparently took no interest in them at the time, because they would have had an effect similar to that of this amendment. For instance, they would have given the hon. Gentleman an input—if he desired it—into the decision making through the Treasury Select Committee and confirmatory hearings.
One of our regrets in Committee was that Labour Members were carefully chosen to serve on the Standing Committee in such a way as to filter out anyone with independent views or powers of scrutiny. No Labour Member who spoke critically or showed that he had something to contribute in the Second Reading debate was included in the Standing Committee membership. For instance, the hon. Member for Great Grimsby (Mr. Mitchell) made an extremely penetrating speech on Second Reading, and we regretted that he was not a member of the Committee and we could not discuss his views at greater length. Perhaps he does not regret that fact, but we did occasionally.
A range of Labour Members who did not have a great deal to contribute served on the Committee. Therefore, although we persistently won the argument, we always lost the vote, and it was left to the other place to devise the amendment that we are now discussing. It sweeps up many of our ideas and amendments. It may not be perfect—in fact, I prefer some of our amendments—but it is a valid and constructive contribution to the question of how members of the Monetary Policy Committee should be appointed, how that committee should operate and how it might gain enhanced credibility from that method of appointment.
In summary, the Lords amendment places a modest constraint on the untrammelled powers of patronage enjoyed by the Chancellor of the Exchequer. It is a modest


element of devolution, and it could improve the decision making and standing of the Monetary Policy Committee. For those reasons, I urge the House to accept the Lords amendment.

Mr. Austin Mitchell: I rise to speak in favour of this intriguing little amendment which has been proposed by that well-known defender of Scottish interests, the House of Lords. I moved a similar amendment before the Bill left this place which sought to ensure a wider geographical representation on both the court of directors and the Monetary Policy Committee. I would like to see representatives from Scotland appointed by the First Minister for Scotland as well as a representative from the north of England.
It is vital that the committee reflects a wide spread of interests. The Minister said, quite rightly, that the committee is the custodian of the national interest. However, the national interest comprises regional interests and the interests of different sections of our society. That includes manufacturing interests in the north and in Scotland, as well as the interests of finance and financial services in London. Therefore, I would like to see specific geographically based representatives serving on the committee. That is the only way in which we shall reach some consensus about the national interest.
Committee members are not Olympians who give a detached opinion about what is in the national interest: they are all pushing a particular barrow. If their interest is not geographical, the committee will reflect the interests of finance. I do not wish to see finance dominate the interests of manufacturing in this country.
5.45 pm
This is an interesting and important little amendment. I understand why the Government intend to oppose it, but it is a little sad to see a Scottish party rejecting this Lords amendment. It is not a happy spectacle. The amendment also allows us to mention some concerns that a Scottish representative on the Monetary Policy Committee might have raised during that committee's deliberations. There is no doubt that the experience of that committee—lwhich is at work even before the legislation is passed—has not been happy, to say the least. Its operations have been very messy indeed.
It is not as though the committee comprises a body of independent monetary experts who, in light of their academic knowledge about the workings of inflation, can read the dials and pull the appropriate levers, which results in the inevitable inflationary effect in 18 months. The economy does not work like that, and the myths of monetarism have been exploded. The monetary target towards which the committee has worked is undoubtedly far too tight. That has led to deflation, and consequently to high interest rates in this country. It has pushed up the value of the pound, making it attractive to the money pouring out of Europe as a result of instability caused by pursuit of the monetary union farce. That money goes into sterling, which pushes up the value of the pound.
At the same time, the deutschmark has been deliberately and steadily depreciated, and far eastern currencies have also been devalued substantially. As a result, the Monetary Policy Committee—which does not

include a Scottish representative—is not able to do its job properly. It is becoming the instrument of over-valuation, which will lead to a major recession this time next year.
I am afraid that we have appointed the wrong people to the Monetary Policy Committee. They are eminent academics: almighty, invisible academics only wise, like light inaccessible hid from our eyes—at least for six weeks until they have taken their decisions. That brings me to another point: the decisions should be known immediately. Why are the committee's minutes not published immediately, so that they may be subject to lobbying?

Mr. Deputy Speaker: Order. I think that the hon. Gentleman has enough parliamentary experience to know that he is moving into a general debate about the role of the committee. That is not the intention of the amendment under discussion.

Mr. Mitchell: A Scottish representative would introduce a note of canny common sense which does not seem to have operated in the committee thus far. I think that it is important to strengthen the representation of the interests of manufacturing in the way that this Lords amendment would do. When the Monetary Policy Committee was first constituted, I thought that Bank of England officials, because of their long desire for high interest rates—the first reflex of the Bank of England is: when in doubt, put up interest rates—would act as agents for deflation. I thought that the Government's appointees would work in a different way and serve the people's interests, which lie in growth, expansion, jobs and full employment. However, the exact opposite has occurred.
Of the appointments made by my right hon. Friend the Chancellor of the Exchequer, only Dee Ann Julius has been voting for sense. That is incredible. We have appointed experts to advance the interests of the people and the Government's views, yet they are voting consistently and persistently for higher interest rates. 1 hoped that Scottish representation would be a weight against such an automatic bias in favour of deflation, which my right hon. Friend the Chancellor has imposed on us.
When the Organisation for Economic Co-operation and Development, the World bank and the International Monetary Fund are saying that there is no need further to increase British interest rates—there is a case for them being reduced—it is incredible that our appointees are still urging a further increase in interest rates. Let the members of the committee be accessible, and let them be Scottish. Let them speak for the interests of the people.
The members of the committee are subject to lobbying, and lobbying should take place. We need to know what they have said immediately they have said it. The experiment has begun badly, with a messy procedure that is creating not stability but endless speculation, argument and pleas that the committee should make a final statement to the effect, "That is the end of increases in interest rates and we shall now start on the way to reducing them." There are constant calls for that action to be taken, but that cannot be, because the committee is divided. As I have said, it is not giving us stability or sense. Instead, it is creating a scenario of deflation. If outside interests were appointed, the committee might be led to sense.
My right hon. Friend the Chancellor of the Exchequer must do something to stop the remorseless rise of the pound, which is so damaging to our manufacturing base. I have sent him various solutions, and I hope that he accepts them. I hope also that he will consider the arguments that I have advanced this evening. Certainly something must be done.

Mr. Edward Davey: I oppose the Government's motion to disagree with the amendment. I support the amendment for some, if not all, of the reasons advanced by the hon. Member for Great Grimsby (Mr. Mitchell). Although the amendment is far from perfect, it would give Scotland at least some say on appointments to the powerful Monetary Policy Committee. Liberal Democrats believe that such a small but significant element of guaranteed representation, or a voice in appointments to the MPC, would give Scotland an extra dimension, and would be useful in ensuring more effective policy making within the Bank.
My party's position needs a little explanation because my colleagues in the other place voted with the Government on the amendment. They did so for reasons that we understand and share. Indeed, my hon. Friends and I tabled amendments whose thrust met the criticisms of our colleagues in the other place. Criticisms of the original amendment were limited to scope. Unfortunately, despite our best endeavours, we failed to produce an amendment that you and your colleagues, Mr. Deputy Speaker, could deem to be in order.
I wish to place on record again our view, as advanced by me and my hon. Friend the Member for Twickenham (Dr. Cable) in Committee and on Report, which is contrary to what the Chief Secretary alleged. We believe that the newly independent Bank of England should represent fully all the nations and regions of the United Kingdom. In the spirit of our amendments, we shall support the Lords amendment, which provides the only element of additional representation on offer.
Speaking in the other place, Lord Newby explained why Liberal Democrats felt that the interests of Wales, Northern Ireland and the regions of Britain should all be captured in the deliberations of the MPC. Such representation is not uncommon on the management and decision-making boards—

Mr. Deputy Speaker: Order. The hon. Gentleman is seeking to speak to amendments that were not selected. He must not do that.

Mr. Davey: I am sorry, Mr. Deputy Speaker. I am trying to make a connection that is relevant to the position of Liberal Democrats in tonight's vote.

Mr. Deputy Speaker: Order. I allowed the hon. Gentleman to make that connection. He must not now develop an argument.

Mr. Davey: My argument, Mr. Deputy Speaker, is that representation such as the amendment would grant is not uncommon in other independent banks. The comments that I shall proceed to make are directly relevant and I hope that you will find them in order.
The Federal Reserve Bank of the United States and the Bundesbank in Germany have representation that goes beyond the central area. Against that background,

the amendment does not represent a madcap invention. Instead, it focuses on a tried-and-tested way in which to operate decision making on monetary policy. It would ensure that a region's voice could be heard and that differing economic conditions could be taken account of in setting interest rates.
The Chief Secretary has argued that clause 16(2) meets the regional representation issue. The clause requires the court to ensure that the MPC has collected the necessary regional and sectoral data and examined them. The right hon. Gentleman said that, by appointing people to the court of the Bank who are clearly identified with Scotland, Wales and Northern Ireland, the Government have demonstrated that they believe that the regions will be fully represented.
Such measures are superficial; the data requirement would have been met in any event. Before the Bill was introduced, the monetary-policy-making authorities examined similar data to that which will come before the MPC. The problem with the Government's approach, as the right hon. Member for Wells (Mr. Heathcoat-Amory) said, is that no one who takes decisions on interest rates will represent the nations and regions of our country.
As the Bill stands, no one on the MPC need be from Scotland, Wales or Northern Ireland. Although the members of the committee are all eminent people, no one would suggest that they spent, or have spent, the bulk of their working lives outside what the right hon. Member for Wells described as the triangle of Oxford, Cambridge and London. The Government's approach to recognising nationhood and regionalism in the Bill is insufficient. The amendment is intended to put that right, albeit only partially.
It has been argued that such representation is not necessary because Britain is not a federal state, yet, as we are passing the Bill, the United Kingdom is fast down the track of becoming such a state. Perhaps it is not yet in name a federal state, but it is very much so in practice, with a Scottish Parliament and a Welsh assembly, and now an assembly in Northern Ireland. There is to be a council of the British Isles.
The institutions of UK federalism are being formed. These institutions need to be nourished and further developed. Options such as government in the English regions or national government for England alone are now being actively discussed in all parties. Recognising the regions and nations more explicitly in the Bank's new decision-making body would help to nourish federalism in the UK.
The Chief Secretary argued that the MPC should be made up solely of the best available people and should not be restricted to representatives from Scotland or elsewhere. Indeed, it should have the best people. However, the suggestion that Scotland could not supply such people shows an amazing lack of confidence in the right hon. Gentleman's countrymen. Given the number of successful Scottish business men and economists, going back to Adam Smith, as the right hon. Member for Wells said, I am surprised that the Chief Secretary does not have more confidence in his countrymen. As he sits on the Treasury Bench, which is stuffed full of Scots, I am surprised that he takes a rather weak and indecisive approach.
At this late stage, I urge the Government to think again and to give Scotland a voice in appointments to the MPC, as a first step to allowing wider national and regional involvement.

Dr. Lewis Moonie: I was delighted to hear a Liberal Democrat Member, the hon. Member for Kingston and Surbiton (Mr. Davey), advancing the opposite case to that which his party supported in the other place. I have often heard that Liberal Democrats have a habit of doing that. However, this evening is the first time that I have heard a Liberal Democrat Member indulge in the practice. It was impressive.
It is with some trepidation that I support my right hon. Friend the Chief Secretary. That is not because of lack of conviction about the arguments which he advanced, but because of my friendship with Lord MacKay, who argued the opposite case in another place. As I am likely to sit in a small boat fishing with him at some time over the next few weeks, I shall tread carefully. If one thing is sure, the Tay is running deep at this time of year. I suspect that I would sink like a stone.
There is only one key argument, but it has two parts. First, should there be regional representation in the Bank of England? I think that it is agreed that there should be. Secondly, should that representation be on the Monetary Policy Committee? That is a different kettle of fish.
I am absolutely convinced that there is—as there should be—adequate representation of regional interests on the court of the Bank of England through our policy, and that will be more so in future. It is highly illogical to say that the membership of a small, tight committee such as the Monetary Policy Committee should be gradually expanded to encompass whatever form of federal or regional government we decide on over the next few years: we are talking about a Scot today, but it may be an Irishman tomorrow, then a Welshman, then a Yorkshireman and then someone from the north of England. We would have the sort of committee that used to be set up in certain parts of the Labour party not long ago: the way in which to make absolutely certain that a decision was not reached was to put everyone with a point of view on the committee.
The amendment is nonsense. The MPC should be small, tightly focused and appointed in the way it is at the moment, so that there is no dubiety about who is on it and why. There is adequate provision for regional points of view to be considered by the court, and that is where they should stay.

6 pm

Mr. Swinney: For a moment, Mr. Deputy Speaker, you may have thought that Lord MacKay of Ardbrecknish was still a Member of this House because of the way in which he is haunting the debate like a spectre. I appreciate the concern of the hon. Member for Kirkcaldy (Dr. Moonie) about his future in a boat on the deep River Tay; I shall alert the bailiffs in my constituency to his imminent presence with Lord MacKay to ensure his protection.
The remarks of the right hon. Member for Wells (Mr. Heathcoat-Amory) bore a startling resemblance to the Hansard report of Lord MacKay's contribution to the debate in the other place. Notwithstanding that, I welcome

the debate. The heart of the argument is the question of how representative the MPC is of the component economies of the United Kingdom and of different economic conditions.
I want to comment on the component economy of Scotland in relation to the United Kingdom. I intervened on the Chief Secretary to point out that the latest Halifax survey shows that house prices in the south-east have increased by 12.4 per cent. in the past 12 months, but in Scotland, have fallen by just under 1 per cent. I accept that patterns of overheating and house price increases are not uniform, but there are substantial differences in the nature and pattern of economic activity between those two important parts of the United Kingdom.
According to the Scottish Council (Development and Industry), Scotland's manufacturing exports last year were valued at more than £20 billion and were higher per head than those of other parts of the United Kingdom. Today, there has been a further and welcome initiative from Scottish Trade International to boost the export performance of Scotland, but it is difficult to promote such an initiative when the value of sterling is so high and the relationship between interest rates and the value of sterling is creating difficulties for our exporters. Unemployment in Scotland is now consistently higher than in the rest of the United Kingdom, which is a disturbing change to the trend.
In response to my intervention, the Chief Secretary said that there was overheating in the economy in different parts of the country; he is obviously familiar with overheating in the Edinburgh house market. On how many occasions would he expect the Bank of England Monetary Policy Committee to turn a blind eye to overheating in the economy of the south-east of England? I suspect that it would never do so, because it observes such conditions primarily to guarantee that the economic policy of the United Kingdom is sustained. Under Labour and Conservative Governments, it has persistently been directed by the prevailing economic conditions in the south of England.
The Chief Secretary made a series of points about the way in which the composition of the court of the Bank of England had ensured that the different component factors of the economy of the United Kingdom could be borne in mind in its discussions and decisions. Everything that he said about the Bank of England court would be justifiable and valid about the MPC, which takes decisions that are of much greater significance to the economy of Scotland.
I welcome Jim Stretton's appointment to the court of the Bank of England. Having worked in the life insurance sector before being elected to the House, I am aware of his formidable reputation in the industry, but he is not on the MPC, which is where big decisions about interest rates, which affect the livelihoods of manufacturers and exporters within the Scottish economy and in the rest of the United Kingdom, are taken.
Will the Chief Secretary say what input is given to the MPC in relation to the divergent patterns of economic activity within the United Kingdom? There is scant reference to the economic conditions of Scotland in the minutes of the MPC, and I should welcome his guidance on whether there is a need to improve the amount and type of information that goes to the MPC to ensure that it hears a more representative account of the position of the United Kingdom economy.
The MPC is where the action is; it has increased interest rates five times since the general election, and there should be a voice for Scotland. For that reason, we shall support the Lords amendment.

Mr. Darling: I cannot agree with the last argument.

Mr. Deputy Speaker: Order. The hon. Member for North Tayside (Mr. Swinney) has finished his remarks, so the Chief Secretary should seek the leave of the House to speak.

Mr. Darling: With the leave of the House, Mr. Deputy Speaker, may I say that I do not agree with the Scottish National party's argument? It tends to view everything in terms of the difference between Scotland and England and, somehow, everything is the fault of the English. I represent a Scottish constituency, and I think that I represent the majority view of Scotland, which does not take that simplistic and sometimes nasty view of the way of things. We live in the United Kingdom and remain part of it.
We have heard two arguments. The first came from Conservative Members and my hon. Friend the Member for Great Grimsby (Mr. Mitchell). They were against the concept of independence for the Bank of England in the first place, and always have been against it. It is curious that the shadow Chief Secretary has embraced a Lords amendment that would give a voice to the First Minister of the Scottish Parliament on something in which the right hon. Gentleman does not believe.
Interest rates have had to go up; it would have been much better if the previous Government in their last months in office had taken the necessary steps to ensure that we achieved the long-term stability that this country needs rather than ducking decisions purely because the Conservative party might have been damaged even more in the run-up to the general election.
The second irony is that the shadow Chief Secretary and, for the first time in a generation, the Conservative party, seem to care what Scotland thinks. Conservatives say that they want to save us from the works of the Monetary Policy Committee by having a voice for Scotland on it. It is nice that the Conservative party has such confidence in Scotland.
The amendment has no merit whatever. It is unnecessary, and the court of the Bank of England is far more widely representative than ever—the previous Government did nothing about that in 18 years in power. Our reforms of the MPC are in the long-term interests of the United Kingdom, which is evidenced by the fact that long-term interest rates are the lowest for 33 years. On that basis, I urge the House to reject the amendment.

Mr. Fallon: The Government cannot have it both ways. On the one hand, the Economic Secretary commends previous Lords amendments as sensible revisions from the revising Chamber; on the other, the Chief Secretary whinges that this amendment is the result of a teatime ambush. If it is, whose fault is that? Perhaps it is that of the Government Whips in the other place, or of new Labour peers, who have been nominated to the other place but are too busy to attend. Perhaps they are spending more time with their money—who knows?
The Chief Secretary has wholly misunderstood the amendment. Appointments to the Monetary Policy Committee would still be made by the Chancellor if it

were accepted. He would simply be required to make one appointment on the advice of the First Minister. What is the Chief Secretary frightened of? He does not appear to have much confidence in the first First Minister, whoever he might be. I thought that it was supposed to be the current Secretary of State for Scotland. Under this amendment, why would he want to nominate someone of whom the Chancellor would not approve? That argument simply will not wash.
The Chief Secretary's argument that, because we opposed the Bill in the first place, we should not now support the amendment, will not wash either. We did not want an independent Bank of England of the nature that is set up by the Bill but, as we are getting one, we do not see why the Monetary Policy Committee should not better reflect all parts of the UK.
This is an amendment for openness. It widens the membership of the Monetary Policy Committee and helps to break up the Oxbridge-London mafia—[Interruption.] I certainly support its break-up. Above all, it is an amendment for Scotland, which all true Scots should be proud to support. I invite my right hon. and hon. Friends to oppose the Government's motion.

Question put, That this House doth disagree with the Lords in the said amendment:—

The House divided: Ayes 231, Noes 107.

Division No. 248]
[6.10 pm


AYES


Abbott, Ms Diane
Cohen, Harry


Ainger, Nick
Coleman, Iain


Ainsworth, Robert (Cov'try NE)
Connarty, Michael


Allen, Graham
Cook, Frank (Stockton N)


Anderson, Janet (Rossendale)
Cooper, Yvette


Atherton, Ms Candy
Corbett, Robin


Austin, John
Corston, Ms Jean


Barnes, Harry
Cousins, Jim


Bayley, Hugh
Cranston, Ross


Beard, Nigel
Crausby, David


Benn, Rt Hon Tony
Cryer, John (Hornchurch)


Bennett, Andrew F
Dalyell, Tam


Benton, Joe
Darling, Rt Hon Alistair


Bermingham, Gerald
Darvill, Keith


Berry, Roger
Davey, Valerie (Bristol W)


Best, Harold
Davies, Rt Hon Denzil (Llanelli)


Blackman, Liz
Dean, Mrs Janet


Blears, Ms Hazel
Denham, John


Blunkett, Rt Hon David
Dismore, Andrew


Boateng, Paul
Doran, Frank


Bradley, Keith (Withington)
Dowd, Jim


Bradley, Peter (The Wrekin)
Dunwoody, Mrs Gwyneth


Brinton, Mrs Helen
Eagle, Maria (L'pool Garston)


Brown, Rt Hon Nick (Newcastle E)
Edwards, Huw


Brown, Russell (Dumfries)
Ennis, Jeff


Buck, Ms Karen
Field, Rt Hon Frank


Butler, Mrs Christine
Fitzpatrick, Jim


Byers, Stephen
Fitzsimons, Lorna


Campbell, Ronnie (Blyth V)
Flint, Caroline


Campbell-Savours, Dale
Follett, Barbara


Caton, Martin
Galloway, George


Chisholm, Malcolm
Gapes, Mike


Clapham, Michael
Gardiner, Barry


Clark, Dr Lynda
George, Bruce (Walsall S)


(Edinburgh Pentlands)
Gibson, Dr Ian


Clarke, Charles (Norwich S)
Gilroy, Mrs Linda


Clarke, Eric (Midlothian)
Godman, Dr Norman A


Clarke, Rt Hon Tom (Coatbridge)
Golding, Mrs Llin


Clelland, David
Gordon, Mrs Eileen


Clwyd, Ann
Grant, Bernie


Coaker, Vernon
Griffiths, Jane (Reading E)






Grocott, Bruce
Mudie, George


Grogan, John
Mullin, Chris


Hall, Mike (Weaver Vale)
Murphy, Denis(Wansbeck)


Hall, Patrick (Bedford)
Murphy, Jim (Eastwood)


Hanson, David
Murphy, Paul (Torfaen)


Heal, Mrs Sylvia
Norris, Dan


Henderson, Ivan (Harwich)
Olner, Bill


Hepburn, Stephen
Palmer, Dr Nick


Heppell, John
Pearson, Ian


Hill, Keith
Pike, Peter L


Hinchliffe, David
Plaskitt, James


Hoey, Kate
Pond, Chris


Home Robertson, John
Pope, Greg


Hood, Jimmy
Prentice, Ms Bridget (Lewisham E)


Hoon, Geoffrey
Prentice, Gordon (Pendle)


Hope, Phil
Primarolo, Dawn


Howarth, George (Knowsley N)
Purchase, Ken



Howells, Dr Kim
Quin, Ms Joyce


Hoyle, Lindsay
Quinn, Lawrie


Hughes, Ms Beverley (Stretford)
Radice, Giles


Humble, Mrs Joan
Rapson, Syd


Hurst, Alan
Reid, Dr John (Hamilton N)


Hutton, John
Rogers, Allan


Iddon, Dr Brian
Rooker, Jeff


Illsley, Eric
Rooney, Terry


Ingram, Adam
Ross, Ernie(Dundee W)



Jackson, Ms Glenda (Hampstead)
Rowlands, Ted


Jackson, Helen (Hillsborough)
Ruane, Chris


Jamieson, David
Russell, Ms Christine (Chester)



Johnson, Miss Melanie
Salter, Martin


(Welwyn Hatfield)
Savidge, Malcolm


Jones, Barry (Alyn & Deeside)
Sedgemore, Brian


Jones, Helen (Warrington N)
Shaw, Jonathan


Jones, Dr Lynne (Selly Oak)
Sheldon, Rt Hon Robert


Jones, Martyn (Clwyd S)
Shipley, Ms Debra


Keeble, Ms Sally
Simpson, Alan (Nottingham S)


Keen, Alan (Feltham & Heston)
Skinner, Dennis


Kelly, Ms Ruth
Smith, John (Glamorgan)


Kemp, Fraser
Smith, Llew (Blaenau Gwent)


Kennedy, Jane (Wavertree)
Soley, Clive


Khabra, Piara S
Southworth, Ms Helen


Kidney, David
Spellar, John


Kilfoyle, Peter
Starkey, Dr Phyllis


King, Ms Oona (Bethnal Green)
Stevenson, George


Kumar, Dr Ashok
Stewart, David (Inverness E)



Ladyman, Dr Stephen
Stewart, Ian (Eccles)


Lawrence, Ms Jackie
Stinchcombe, Paul


Laxton, Bob
Stinchcombe, Paul


Leslie, Christopher
Stoate, Dr Howard


Levitt, Tom
Strang, Rt Hon Dr Gavin


Liddell, Mrs Helen
Straw, Rt Hon Jack


Linton, Martin
Stuart, Ms Gisela


Love, Andrew
Sutcliffe, Gerry


McAllion, John
Taylor, Rt Hon Mrs Ann


McAvoy, Thomas
(Dewsbury)


McCafferty, Ms Chris
Taylor, Ms Dari (Stockton S)


McFall, John
Temple—Morris, Peter


McGuire, Mrs Anne
Thomas, Gareth (Clwyd W)


McIsaac, Shona
Tipping, Paddy


Mackinlay, Andrew
Touhig, Don


McNulty, Tony
Truswell, Paul


Mactaggart, Fiona
Turner, Dennis (Wolverh'ton SE)


McWalter, Tony
Twigg, Derek (Halton)


Mahon, Mrs Alice
Twigg, Stephen (Enfield)


Marshall, David (Shettleston)
Vaz, Keith


Marshall, Jim (Leicester S)
Wareing, Robert N


Marshall—Andrews, Robert
Watts, David


Martlew, Eric
White, Brian


Maxton, John
Whitehead, Dr Alan


Michael, Alun
Williams, Rt Hon Alan


Miller, Andrew
(Swansea W)


Moonie, Dr Lewis
Williams, Alan W (E Carmarthen)


Moran, Ms Margaret
Williams, Mrs Betty (Conwy)


Morgan, Ms Julie (Cardiff N)
Wills, Michael


Morgan, Rhodri (Cardiff W)
Winnick, David


Morris, Ms Estelle (B'ham Yardley)






Woolas, Phil
Tellers for the Ayes:


Wright, Dr Tony (Cannock)
Mr. Clive Betts and


Wyatt, Derek
Mr. Jon Owen Jones.




NOES


Ainsworth, Peter (E Surrey)
Howard, Rt Hon Michael


Allan, Richard
Howarth, Gerald (Aldershot)


Ancram, Rt Hon Michael
Hunter, Andrew


Arbuthnot, James
Jack, Rt Hon Michael


Ashdown, Rt Hon Paddy
Jenkin, Bernard


Atkinson, Peter (Hexham)
Johnson, Smith


Baker, Norman
Rt Hon Sir Geoffrey


Bercow, John
Key, Robert


Blunt, Crispin
King, Rt Hon Tom (Bridgwater)



Boswell, Tim
Kirkbride, Miss Julie


Bottomley, Rt Hon Mrs Virginia
Laing, Mrs Eleanor


Breed, Colin
Letwin, Oliver


Brooke, Rt Hon Peter

Lewis, Dr Julian (New Forest E)


Browning, Mrs Angela
Lidington, David


Bruce, Ian (S Dorset)
Lilley, Rt Hon Peter


Bruce, Malcolm (Gordon)
Lyell, Rt Hon Sir Nicholas


Burns, Simon
Mackay, Andrew


Cable, Dr Vincent
Maclean, Rt Hon David


Campbell, Menzies (NE Fife)
McLoughlin, Patrick


Chidgey, David
Major, Rt Hon John


Clappison, James
Maples, John


Clark, Dr Michael (Rayleigh)
Maude, Rt Hon Francis


Clarke, Rt Hon Kenneth
Mawhinney, Rt Hon Sir Brian


(Rushcliffe)
Michie, Mrs Ray (Argyll & Bute)


Clifton—Brown, Geoffrey
Moss, Malcolm


Collins, Tim
Ottaway, Richard


Cormack, Sir Patrick
Paice, James


Cotter, Brian
Paterson, Owen


Cran, James
Prior, David


Davey, Edward (Kingston)
Randall, John


Davies, Quentin (Grantham)
Redwood, Rt Hon John


Davis, Rt Hon David (Haltemprice)
Rendel, David


Dorrell, Rt Hon Stephen
Robathan, Andrew


Duncan, Alan
Robertson, Laurence (Tewk'b'ry)


Duncan Smith, lain
Russell, Bob (Colchester)


Evans, Nigel
St Aubyn, Nick


Fallon, Michael
Sanders, Adrian


Feam, Ronnie
Shephard, Rt Hon Mrs Gillian


Forth, Rt Hon Eric
Shepherd, Richard


Foster, Don (Bath)
Spicer, Sir Michael


Fox, Dr Liam
Streeter, Gary


Garnier, Edward
Stunell, Andrew


Gibb, Nick
Swayne, Desmond


Gillan, Mrs Cheryl
Swayne, Desmond


Goodlad, Rt Hon Sir Alastair
Swinney, John


Gray, James
Taylor, John M Solihull)


Green, Damian
Tonge, Dr Jenny


Greenway, John
Trend, Michael


Grieve, Dominic
Tyrie, Andrew


Hague, Rt Hon William
Walter, Robert


Hamilton, Rt Hon Sir Archie
Waterson, Nigel


Harvey, Nick
Weksg, Andrew


Wigley, Rt Hon Dafydd



Young,Rt Hon Sir George



Hawkins, Nick




Heald, Oliver
Tellers for the Noes:


Heath, David (Somerton & Frame)
Mr. Stephen Day and


Heathcoat—Amory, Rt Hon David
Mr. John Whittingdale.

Question accordingly agreed to.

Lords amendment disagreed to.

Clause 28

BOARD OF BANKING SUPERVISION

Lords amendment: No. 6, in page 12, line 9, leave out

(", who shall chair the Board,")

Mrs. Liddell: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this, it will be convenient to discuss also Lords amendment No. 7.

Mrs. Liddell: The amendments further reinforce the independence of the Board of Banking Supervision by giving the chair to one of the non-executive members. We have consulted the Financial Services Authority chairman, Howard Davies, and, through him, the non-executive members of the board. Having done so, and having confirmed that they are content with this change to their rules, I commend the amendments to the House.

Mr. Fallon: We, too, welcome the change made to the Bill on Third Reading in another place. Those who believe in transparency clearly consider it a good idea that the chairman of the authority should not also be the chairman of the Board of Banking Supervision, especially when that board may be investigating the performance of the authority, deciding not to investigate the performance of that authority or, as in the Barings case, dealing with the conclusions of that investigation.
That brings us to the bigger question of exactly what the Board of Banking Supervision's new role is going to be. Perhaps the Economic Secretary can tell us briefly whether it is to be advisory or supervisory.
The independence that the Economic Secretary is now accepting for the chairmanship, which we welcome, brings out the issue of practitioner involvement. I must say at once that we are not happy with what the FSA is proposing in its consultative documents, and we expect a considerable improvement when the draft clauses are published later this year.

Mrs. Liddell: I reiterate the point made in Committee, which is that we do not propose to retain the Board of Banking Supervision in its current form when we introduce new legislation. That would not be in keeping with the wider regulatory responsibilities of the FSA. The FSA has been consulting on the issue of practitioner input for the longer term. It is not a subject that we would want to discuss at this stage, but there will be plenty of opportunity to do so at the end of the consultation period, when the legislation comes before the House.

Lords amendment agreed to.

Lords amendment No. 7 agreed to.

Clause 40

ORDERS

Lords amendment: No. 8, in page 16, line 12, at end insert

("or

paragraph 3(2) of Schedule 7,")

Mrs. Liddell: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this, it will be convenient to discuss also Lords amendment No. 9.

Mrs. Liddell: The House will be aware that the House of Lords Select Committee on Delegated Powers and Deregulation considered the order-making powers contained in the Bill. Its report of 4 February


recommended that the parliamentary procedure to implement the power under paragraph 3(2) of schedule 7 should be the affirmative rather than the negative. The Government accepted the Committee's recommendation, and I accordingly commend the amendments to the House.

Mr. Gibb: I am a relatively new Member of the House, and I wish to raise a concern that I and other new Members have—one that is shared increasingly by people outside, especially those who need access to legislation. It relates to the growing amount of delegated legislation. It has been a feature of all Governments in recent years, but it appears to be a particular penchant of the new Labour Government. For example, it now appears that major tax changes, such as reforms to the capital gains legislation, are to be introduced by statutory instrument rather than through the Finance Bill.
The 11th report of the House of Lords Select Committee on Delegated Powers and Deregulation says of paragraph 3(2) of schedule 7:
The power to amend the Table is potentially wide, and the appropriate degree of parliamentary control depends on the uses to which it will be put. The House may wish to consider whether it is not of such significance as to justify amending the Bill to provide for the affirmative resolution procedure, rather than the negative procedure currently proposed in the Bill.
Indeed, the memorandum to the Select Committee prepared by the Treasury lists in an annex all the new delegated powers created by the Bill—there are some 15 new delegated powers from one single Bill.
I raise this matter now as a concerned Back Bencher, but it was already of general concern when I was in practice before entering the House. Will the Minister confirm that she is aware of this widespread concern, and give an assurance that the Government will seek to redress the huge increase in secondary legislation which has been their hallmark since it came to power a year ago?

Mrs. Liddell: The Government believe—

Mr. Deputy Speaker: Order. The hon. Lady must ask the leave of the House.

Mrs. Liddell: With the leave of the House. As a relatively new Member, I also make mistakes.
The Government have made it clear that we believe in consultation, and in listening to people's views. Although I am a comparatively new Member, I was in the House during the last Parliament when the previous Government used the deregulation orders many times and in relation to secondary legislation. Therefore, I believe that this amendment is a useful addition to the Bill, and I reiterate my commendation of it to the House.

Lords amendment agreed to.

Lords amendment No. 9 agreed to.

Clause 44

CONSEQUENTIAL AMENDMENTS

Lords amendment: No. 10, in page 16, line 32, at end insert—

("(1A) Section 33 extends to the Channel Islands and the Isle of Man.")

Mrs. Liddell: I beg to move, That this House doth agree with the Lords in the said amendment.
This is a technical amendment that would ensure that the transfer of the gilts registration function of the National Savings stock register to the Bank of England register also has legal effect in the Channel Islands and in the Isle of Man. I commend it to the House.

Mr. Gibb: Does this amendment have anything at all to do with the review into those territories being conducted by the Home Secretary?

Mrs. Liddell: With the leave of the House, Mr. Deputy Speaker—no.

Lords amendment agreed to.

Schedule 5

TRANSFER OF FUNCTIONS: CONSEQUENTIAL AMENDMENTS

Lords amendment: No. 11, in page 29, line 22, leave out ("paragraphs 31 and") and insert ("paragraph")

Mrs. Liddell: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this it will be convenient to discuss Lords amendments Nos. 12 to 16.

Mrs. Liddell: This is a group of six technical amendments. Amendment No. 11 tidies up the consequential amendment contained in schedule 5. Amendments Nos. 12, 13 and 16 would ensure that consequential changes to the Courts and Legal Services Act 1990 are accurate. Amendment No. 14 is required to make a consequential amendment to the Building Societies Act 1997. It arises because of the transfer of banking supervision to the Financial Services Authority. Amendment No. 15 would remove some redundant definitions from the Bill. I commend the amendments to the House.

Mr. Fallon: I want briefly to raise two issues. The Economic Secretary described the amendments as technical. Amendment No. 14 is not that technical. As I understand it, it replaces the Bank of England with the Financial Services Authority as the consultative body if any amalgamation is proposed to the Building Societies Investor Protection Board and the Deposit Protection Board. It might assist the House if the hon. Lady said whether that is the Government's immediate intention—is an amalgamation proposed?
I put the hon. Lady on notice that we will need to go into greater detail on the role of the Financial Services Authority as it relates to building societies more generally. While we were all on holiday, the Treasury slipped out an announcement about a voluntary code, which ensures that generally building societies will not be brought under the arrangements for the new authority.
Perhaps the hon. Lady could help the House on amendment No. 15, which would delete the words "overseas institution" and "representative office". The other place was told that the words were no longer needed in the Bill, because they had no operative effect, yet they are still in paragraph 1 of schedule 8. Perhaps the Economic Secretary could explain why, if they have no operative effect, they are still in the Bill.

Mrs. Liddell: The Building Societies Act 1997, which went through with the co-operation of both sides of the House, makes provision for a future amalgamation of the Building Societies Investor Protection Board with the Deposit Protection Board. Provision is made for consultation with the Building Societies Commission and the Bank before making any order effective. It will be for the Governor of the Bank to appoint ordinary members of the new board. Therefore, it is sensible to make consequential amendments that draw together the reality of the Financial Services Authority in relation to building societies.
There was no question of the Government sneaking out a voluntary code on building societies—it was introduced by the Council of Mortgage Lenders last July. We merely made an announcement that we would see how it operated before deciding whether the future financial services legislation would contain such a provision. I hope that it is clear that in no sense did the Government try to sneak through a critical measure while the House was in recess. Indeed, the announcement was made before the House rose—although some people may have risen slightly earlier than others.
On amendment No. 15, as the hon. Gentleman said, the words "overseas institution" and "representative office" have no operative effect, so there is no need to define them. The amendment would remove their definitions from the Bill.

Lords amendment agreed to.

Lords amendments Nos. 12 to 16 agreed to.

Committee appointed to draw up a Reason to be assigned to the Lords for disagreeing to their amendment No. 5 to the Bill: Mr. Robert Ainsworth, Mr. Michael Fallon, Mr. David Hanson, Mr. John Whittingdale and Mrs. Helen Liddell; Three to be the quorum of the Committee.—[Mrs. Liddell.]

To withdraw immediately.

Reason for disagreeing to Lords amendment No. 5 reported, and agreed to; to be communicated to the Lords.

Orders of the Day — Data Protection Bill [Lords]

Order for Second Reading read.

The Secretary of State for the Home Department (Mr. Jack Straw): I beg to move, That the Bill be now read a Second time.
This is a detailed, technical Bill, which has already been the subject of extensive debate in the other place. It implements the directive on data protection that was agreed in the European Union in 1995.
The draft directive, which was drawn up in 1990, was the subject of a good deal of discussion in the House. When it came up for discussion in European Standing Committee B in December 1994, serious reservations were expressed by both the then Government and the then Opposition. My hon. Friend the Member for Pontypridd (Dr. Howells) spoke for the Opposition. The directive was then improved, and the previous Government—Mr. Tom Sackville was the Minister—published a consultation document in March 1996. We are under an injunction in the directive to implement the directive in the form of legislation by October this year. The Bill would do that.
The Bill's detail can be the subject of discussion in Committee. However, I want to refer to a few important aspects where there are significant changes from the 1994 Data Protection Act, which itself implemented a 1981 Council of Europe convention on data protection. The first difference is that the Bill covers some manual records, which are known as structured manual records. It does not cover unstructured manual records. Hon. Members will be pleased to hear that, because in my experience that automatically excludes any record held by a Member of Parliament.
Clause 2 sets out special safeguards for the processing of sensitive personal data, including information about matters such as ethnic origin, political or religious opinions, health and sexual life. One important matter that has been raised with the Government—indeed, it was raised with me when I visited the United States in February—concerns the rules governing transfer of personal data to countries outside the European economic area. It is an important issue, which I hope will be discussed in some detail in Committee.
I know that there is come concern among certain of the European Union's trading partners, especially the United States, about how the word "adequacy" in the Bill will be interpreted in practice. Not all countries outside the EU have arrangements that meet the high standards in the directive, but I believe that our proposals for dealing with individual cases are sufficiently flexible to meet controllers' needs, while giving proper effect to the directive.

Mr. Andrew F. Bennett: Will my right hon. Friend explain what protection is available to an individual who provides information to a company which decides to sell it abroad? Does the individual have any veto on the information being sold abroad?

Mr. Straw: That is what the Bill and the directive seek to do. The Bill also seeks to deal with the issue of enforced third-party access to information held by data users. The broader question of third-country adequacy is

being addressed in collective discussions in Brussels, and I am confident that a satisfactory way forward can be found.
The Government are committed to dealing with the problem of enforced subject access. Typically, that occurs where one person requires another to provide information in documentary form which can be obtained only by using the subject access route. That has been a means of accessing individuals' criminal records. The Data Protection Registrar strongly believes that this is wrong in principle, and, in another place, my noble and learned Friend Lord Williams indicated our acceptance in principle of what the registrar had said.
The matter is proving to be a very difficult nut to crack. The issues are complex, and, in some respects—certainly until part V of the Police Act is enforced—there will be a continuing need to ensure that there is access to individuals' criminal records. We are continuing to have discussions with the Data Protection Registrar and her staff. I hope that we can table the necessary amendments in Committee.

Mr. Andrew Miller: My right hon. Friend has just made an important statement. In Committee, will he ensure that sufficient flexibility exists in the legislation to take into account the rapidly changing scene—particularly his Department's use of processes such as data matching, which are very important in crime detection?

Mr. Straw: Yes, we will address that issue, and will listen with care. As we made clear in another place, we approach this matter in an entirely bipartisan way, and there has been excellent co-operation from the Opposition. We do not regard the Bill as perfect, but we have done our best. I am sure that it could be improved, and we look forward to receiving amendments from wherever they come.
Clause 28 was partly amended in the other place, against our advice. We are considering carefully whether there is any way in which we can limit the need for the original provision in clause 28, but we may have to table amendments in Committee.
Understandably, concern was expressed by the media about the way in which the Bill might impact on their rights. Detailed discussions have taken place with representatives of the media, particularly with Lord Wakeham. The conclusions of the discussions have been positive, and are expressed in clause 31. They achieved approbation from both sides of the House, and can be the subject of further discussion in Committee. I believe that they provide a satisfactory way forward, and they appear to have achieved widespread agreement.
In conclusion, I repeat that we regard this as an all-party matter, which we inherited from the previous Administration. It is an important but technical Bill. I look forward to the debate and to the reports of the proceedings in Committee.

Sir Brian Mawhinney: May I immediately tell the Home Secretary that we share his view that we ought to proceed in a bipartisan way? There has been a lot of consultation—which we welcomed—in another place, and we will seek to continue


in that constructive vein during our considerations. I agree that this is a technical Bill. Its principles are important, but I will not seek to get bogged down in the details at this stage. They can be examined in Committee, and I hope that that will be of help to the House.
We are pleased that the principles behind the Data Protection Act 1984 are largely reproduced in the Bill, with some additions. We consider that to be almost the necessary prerequisite to that bipartisan approach. Personal data, and the proper and accurate handling of those data, is important. Our constituents must be protected when people are tempted to misuse information. All of us will have had examples of constituents who have been greatly distressed because they could not find out what was held about them. In many cases, the information was inaccurate, and they had no means of changing it.
As the Home Secretary said, the directive emerged because different countries applied the data protection convention in different ways. The European Commission, as is its tendency, wanted to homogenise everything. We were not aware that the absence of a directive had had a negative effect on trade between member states, or was necessary to ensure fair competition within the Community. We did not believe that a directive was necessary to make the single market work. We did not vote for it, but we have it, and we are now under an obligation to see that it is put into our law.
That leads me to my first question, which can be explored in Committee. The House will want to know what steps are being taken by other countries. We have a tendency in this country to get ahead of the game, and to be conscientious in the implementation of directives. We then find that others—for a variety of reasons—are lagging behind, and our businesses find themselves at a disadvantage. We will want to know what progress is being made in other countries.
We want to know also how much gold-plating is in the Bill, over and above what is required by the directive. When the Labour party was in opposition, it regularly accused us of adding to legislation required by directives, and imposing extra burdens over and above those requirements. In Committee, we will want to explore how much of the Bill flows from the directive, and how much is an opportunity being taken by the Government to add other burdens.
The Home Office said that the directive has three intentions. First, it intends to harmonise data protection legislation throughout the EU. We would prefer a regime of minimum standards, but we will look at the Bill against that background. Secondly, the directive aims to protect the individual's rights and freedoms, particularly the right to privacy with regard to the processing of personal data. That is a matter of common ground between us. Thirdly, the directive facilitates the free flow of personal data within the EU in the interests of improving the operation of the single market. As I have said, we are not aware that the single market is being damaged, but we will bear that in mind.
Like the Home Secretary, I wish to mention a few articles as a tick-list to which we will return in Committee. Article 7 defines the individual's right to gain access to information. That is a very important right, which we will want to make sure is enshrined.

Article 8 introduces the new concept of sensitive data. We will want to explore why such sensitive data might be held in the first place, and whether there are ways of regulating the holding and processing of personal data.
We must look at the range of exemptions in terms of revealing information. The Bill refers to the police, employers, health care services and lawyers. Other things occur to me. What about the notes I take in my political surgeries when constituents come to see me? Will they be covered by the Bill? What about the advice given by citizens advice bureaux to our constituents? There are a number of large issues relating to exemption which we will want to explore in some detail.
Article 9 states that member states must provide exemptions from data processing rules where the information is held solely for the purposes of journalism or literary expression. Like the Home Secretary, I have read the Hansard reports of the debates in another place, and I have talked to my noble Friend Lord Wakeham, whose general view of the article's appropriateness I share. I only wish that the Government had consulted as effectively on the Human Rights Bill as they clearly have on this Bill—they are belatedly doing so, for which we give them half a mark.
We recognise the importance of deferring legal recourse to post-publication—we shall sympathetically examine the Government's decision on that. The Home Secretary mentioned manual records and the concerns of the Data Protection Registrar, which we shall also want to consider further.
On enforcement, clause 41 is a replica of current legislation, but we welcome the Government's willingness to go further, as represented in clause 42, as that goes to the heart of ensuring privacy and confidence in the system. I hope that the Home Secretary will understand if, in Committee, we come back time and again to the question whether the procedures will elicit public confidence.
The final point to which I want to draw attention—the Home Secretary did not mention it—is the enormous cost to business and industry of implementing the Bill. According to the Government's figures—from the Data Protection Commissioner's office—£1.15 billion in non-recurring start-up costs and £750 million in recurring annual costs will be incurred. That is a huge burden on business. It will have an impact on competitiveness for those who compete and market not only within the United Kingdom but—unless there is a level playing field—internationally. That brings me back to where I started: if the Bill is gold-plated, there will not be a level playing field, and we shall add burdens to British business and industry that will not be replicated overseas.
We recognise the importance of technological advance and the need to change procedures to take account of it. We also recognise the importance of personal privacy, accuracy and access to information—in other words, confidence. On the whole, the 1984 Act commanded confidence, and the Bill must do the same—we shall work hard and constructively to ensure that it does. Its principles are right and unexceptional, and we will be so directed, when the time comes, to make a Second Reading judgment.

Mr. Richard Allan: The Liberal Democrats, too, welcome the Bill. Although it has been a long time in gestation, we believe that it should be dealt with with some urgency. It is an important piece of human rights legislation, fitting into a general pattern of reform, which will help to define privacy. We have some concerns, which I shall mention briefly, so that the Government have notice of them—obviously, I shall save the detail for Committee.
A couple of measures are still missing. First, the Home Secretary referred to enforced subject access, on which the Government gave a clear commitment to legislate in the framework of the Bill. We shall be disappointed if nothing is done about that; we favour the creation of a criminal offence.
Secondly, there should be an exemption on the holding of sensitive personal data on ethnicity for the purposes of ethnic monitoring. Clearly, great strides have been made in monitoring the work force, and we do not want the Bill to make such monitoring—when it is in the wider public interest—illegal. The Government made a commitment to create such an exemption in response to an amendment moved in another place by my noble Friend Lord Dholakia—we want them to act on that.
We want the Commissioner to have stronger powers, especially under clause 50, to be more proactive in identifying situations in which the principles are not being complied with. We have concerns about third-country standards, which the Home Secretary mentioned. Moreover, we believe that the media exemptions in clause 31 throw up wider questions, especially in the context of the Human Rights Bill. We are convinced neither that the notion of proportionality in considering the public interest is sufficiently incorporated, nor that clause 31 will stand up when the Human Rights Bill is enacted—we shall want to return to that matter.
We want the measures on data matching to go further; specific codes of conduct should be referred to and made compulsory. We shall also examine the issue of sensitive data that are held by bodies other than the police or the Secretary of State, as we believe that, for example, organisations such as the Royal Society for the Protection of Birds should be able to hold information on wildlife offenders.
We believe that the Bill is sensible, but it is crucial that people register. We welcome the improvement of notification procedures, but, in searching through the information provided by the Data Protection Registrar, I noticed that only slightly more than 100 Members of Parliament are currently registered. I can tell the right hon. Member for North-West Cambridgeshire (Sir B. Mawhinney) that the registrar has proposed new categories of data, including citizens advice bureaux records and the casework of Members of Parliament. I sent off my application form today, and I hope that registration will become more widespread as people become more aware of the issue.

Mr. Richard Shepherd: Because of the extraordinary lateness of the hour, I realise that I must condense my remarks on this important Bill, which owes its genesis and genius elsewhere—in our membership of the European Union.
I want to speak about only one measure, about which I have already teased the Home Secretary. The Bill originally contained a provision—clause 28(4)—which was deleted when the Government were defeated on an amendment moved by Baroness Nicholson in another place. However, the Government have said that the provision may be reintroduced in the House of Commons, which is why I want to highlight it now.
Clause 28(4) gave the Secretary of State the power by order to remove essential safeguards from unspecified classes of personal data. An order removing those rights could be made where it was thought necessary to prevent or detect crime, apprehend or prosecute offenders, or assess or collect tax.
The rights that would be set aside are: first, individuals' rights under clause 7 to obtain a copy of any data held about them—the so—called right of subject access; secondly, the first data protection principle, which requires that those processing data do so fairly and lawfully—the term "processing" includes the obtaining of personal information, the use made of it and its disclosure; thirdly, the so-called non-disclosure provisions, which consist of any of the other safeguards in the data protection principles that may prevent the disclosure of personal information.
The effect of a provision such as clause 28(4) would be drastic. It would allow bodies to obtain information illegally and entitle them deliberately to mislead the individual who asked how the information had been obtained, what use was being made of it, and to whom it was being disclosed.
There are three reasons why the proposal is objectionable. First, it is unnecessary. The preceding provisions—clause 28(1) to (3), which remain in the Bill—permit those safeguards to be set aside in any individual case where their application would prejudice law enforcement or tax collection. Clause 28(4) permitted those safeguards to be set aside in all cases, regardless of whether compliance would prejudice law enforcement or tax collection.

The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth): As a result of the earlier decision, this matter is being considered, as the hon. Gentleman will know. I am more than happy to discuss it with him in detail before the Bill is considered in Committee.

Mr. Shepherd: I greatly appreciate that offer, which I shall indeed take up. I am not trying to talk out the Bill, as the Minister will understand; I want to highlight the issue, and ensure that the reasons behind the Government's decision to delete the measure are given.
My final point is that, in the past—over the Deregulation and Contracting Out Act 1994, for example—the Labour party expressed great concern about the ability to amend, by secondary legislation, primary legislation to which rights were inscribed. Having said that, however, I support the general thrust of the Bill.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).

Orders of the Day — DATA PROTECTION BILL [LORDS] [MONEY]

Queen's recommendation having been signified—

Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a),

That, for the purposes of any Act resulting from the Data Protection Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of—

(a) any increase attributable to the Act in—

(i) the expenses of the Data Protection Registrar (renamed the Data Protection Commissioner by the Act),
(ii) any expenses incurred by the Secretary of State in respect of the Data Protection Tribunal or the members of the Tribunal, and
(iii) any expenses incurred by a government department in complying with the requirements imposed on data controllers,

(b) any administrative expenses of the Secretary of State attributable to the Act, and
(c) any increase attributable to the Act in the sums which under any other Act are payable out of money so provided.—[Mr. Jon Owen Jones.]

Question agreed to.

Orders of the Day — DATA PROTECTION BILL [LORDS] [WAYS AND MEANS]

Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a),

That any Act resulting from the Data Protection Bill [Lords] may—

(a) require the payment of fees in connection with notification by, and the renewal of registration of, data controllers under the Act; and
(b) provide for the payment of those fees and other sums into the Consolidated Fund.—[Mr. Jon Owen Jones.]

Orders of the Day — DELEGATED LEGISLATION

Mr. Deputy Speaker (Mr. Michael Lord): With permission, I shall put together the motions relating to delegated legislation.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

LEGAL SERVICES

That the draft Institute of Legal Executives Order 1998, which was laid before this House on 12th March, be approved.

VALUE ADDED TAX (S.I., 1998, No. 762)

That the Value Added Tax (Supply of Services) (Amendment) Order 1998 (S.I., 1998, No. 762), dated 17th March 1998, a copy of which was laid before this House on 17th March, be approved.

LOCAL GOVERNMENT FINANCE

That the Special Grant Report (No. 34): Metropolitan Railway Passenger Services Grant for 1998–99 (HC 656), which was laid before the House on 24th March, be approved.

LOCAL GOVERNMENT FINANCE (SCOTLAND)

That the Special Grant Report (Scotland): Grant in aid of expenditure on rail services in the Strathclyde Passenger Transport area (HC 660), which was laid before this House on 26th March, be approved.—[Mr. Jon Owen Jones.]

Question agreed to.

Orders of the Day — DEREGULATION COMMITTEE

Ordered,

That Mr. David Lock be discharged from the Deregulation Committee and Mr. Andy King to be added to the Committee.—[Mr. Mudie.]

Orders of the Day — SELECT COMMITTEE ON EUROPEAN LEGISLATION

Ordered,

That Norman Baker be discharged from the European Legislation Committee and Mr. Colin Breed be added to the Committee.—[Mr. Mudie.]

Orders of the Day — WELSH GRAND COMMITTEE

Motion made, and Question put forthwith pursuant to Standing Order No. 107 (Welsh Grand Committee),

That the Welsh Grand Committee shall meet at County Hall, Carmarthen on Tuesday 5th May at Eleven o'clock to take questions under Standing Order No. 103, (Welsh Grand Committee (questions for oral answer)), and to consider the matter of the rural economy in Wales under Standing Order No. 107 (Welsh Grand Committee (matters relating exclusively to Wales)) proceedings being interrupted at half-past Four o'clock—[Mr. Jon Owen Jones.]

Question agreed to.

Orders of the Day — WELSH AFFAIRS COMMITTEE

That Mr. Ieuan Wyn Jones be discharged from the Welsh Affairs Committee and Mr. Elfyn Llwyd be added to the Committee.— [Mr. Mudie, on behalf of the Committee of Selection.]

Orders of the Day — Lloyds TSB Bill [Lords] (By Order)

Order for Second Reading read.

7 pm

Mr. Eric Illsley: I beg to move, That the Bill be now read a Second Time.
It may be appropriate to declare an interest. I contribute to an insurance policy with Abbey Life, which is now wholly owned by Lloyds, and my wife contributes to a pension scheme originally with Target Life which I think went under the control of Abbey Life. Other than that, I have no registrable interests in relation to Lloyds TSB.
In December 1995, two of the United Kingdom's oldest and best-known financial services groups, TSB group and Lloyds bank, merged, with the aim of providing their customers with the widest possible branch network of services that was available from any high street bank. It may seem strange to some hon. Members that, despite securing the necessary regulatory and shareholder approval at the time of the merger, Lloyds TSB group, as it is now called, is required to promote this measure in Parliament.
Before dealing with the Bill's provisions and its recent parliamentary history, it may help if I sketch the background of the United Kingdom's current financial services marketplace, which has changed beyond recognition in the past 15 years. Cash-dispensing machines, credit and debit cards and telephone and even personal computer banking are fast becoming features of many people's everyday lives. Customers no longer expect to have to go to their high street bank at a time that is convenient to the bank. They expect the bank to come to them, and do not invariably expect even to have to walk across the threshold of a bank branch. They want the ease and convenience of knowing that they can pick up and use a telephone on a local rate number any time of the day or night. The two words that encapsulate that change are competition and technology, and the combination of the two is having a profound impact on the shape and structure of the financial services sector in the United Kingdom.
All the major players in the sector are bringing on line ever more sophisticated technologies to tailor their distribution systems to meet the changing and ever more sophisticated needs of their customers. For example, the supermarket chains Sainsbury and Tesco have become significant competitors in the new financial services environment. Sainsbury's bank now has £1.4 billion in deposits from 650,000 customers. Virgin already has more than £1 billion under management through its personal equity plans and pensions business, and intends to enter the banking marketplace later this year.
It seems that scarcely a day goes by without another company announcing its plans to enter the financial services sector. BMW, British Airways and Daihatsu are the latest in a long line of companies declaring an interest in the sector. The new entrants are playing a crucial role in irreversibly transforming the landscape of the UK's financial services sector, as well as representing a challenge to the major providers of retail financial services. We may legitimately question how substantial or sustainable is the challenge. Most of the new entrants are cherry-picking customers from the clearing banks by offering them a narrow range of products and services—

and only those that they think will be highly profitable. It is not a universal service aimed at banking for all sections of the community, and nor do the new entrants intend that it should be. The new entrants are not able to offer the breadth of services and products or the specialised staff that traditional providers offer. They do not want to be saddled with the high infrastructure costs of providing an accessible and fully comprehensive banking service.
That naturally brings me to the sensitive issue of traditional fixed-branch networks. Footfall in branches—the number of customers using fixed branches—is falling year by year for all the major United Kingdom retail banks. As we know, the key drivers of that change are technological advances and increased competition.
In this new financial services climate, Lloyds TSB group, like its competitors, has needed to respond to rapidly changing customer preferences, and constantly needs to look at the shape of its branch network and at ways of delivering services to customers. One good example of that is that the bank has teamed up with Asda supermarkets, and the first Asda in-store bank providing the full range of TSB products opened in December. Six more pilots have since opened. However, Lloyds TSB is, and will remain, the most accessible bank in the United Kingdom. It has 2,700 branches nationwide—900 more than its nearest competitor. For TSB and Lloyds, the branch network is the bedrock of customer services.

Mr. John McWilliam: I am listening with interest to my hon. Friend's explanation. Why did Lloyds close the only joint stock bank branch in Winlaton in the north-east where I live—a catchment area of some 12,000 potential customers—when there is no competition in the village? Was it just for profit?

Mr. Illsley: I appreciate my hon. Friend's concern. Perhaps when he has heard about the initiatives of which I shall speak shortly he will feel more comfortable with the Bill. Before becoming involved with the Bill, I met the banking unions and listened to their concerns about branch closures. Those concerns were addressed by Lloyds TSB to the unions' satisfaction. I shall shortly try to explain how Lloyds will address the issue of branch closures in areas where no other banks are available.
As I said, for TSB and Lloyds the branch network is the bedrock of customer service and the principal means of maintaining contact with customers in all parts of the United Kingdom. It is worth noting that, with just 500 branches each, competitors such as Sainsbury and Tesco fall short of offering the wide and well-balanced branch network that consumers value and that customers of TSB and Lloyds enjoy.
When Lloyds TSB has to close a branch, it goes the extra mile—unlike its competitors—to ensure that its customers continue to have easy access to basic money transaction facilities. Lloyds TSB attaches considerable importance to that, not just because it is a sound and commercially sensible judgment, but because it reflects the company's strongly held belief in corporate citizenship—the belief that social responsibility goes hand in hand with commercial success. The TSB movement, as I shall shortly explain, was founded with that principle at the heart of its business ethos.
In November 1997, Lloyds TSB announced an historic pilot project whereby its customers could cash cheques and withdraw money at selected post offices in their


locality. The scheme has been so successful that Lloyds TSB intends to roll it out to 500 post offices nationwide. I am sure that my hon. Friend the Member for Blaydon (Mr. Mc William) will take that point on board, and I will ask Lloyds TSB whether that pilot project will extend to his area.

Mr. McWilliam: I am grateful to my hon. Friend, but we do not have a post office, either.

Mr. Illsley: I am afraid that my hon. Friend has got me on that one. It seems that he will have some problems in the future.
The project is good news not only for TSB and Lloyds but for the continuance of the country's post offices—apart from in Blaydon, of course—and will help to secure the future of branches in rural areas, which will continue to play an important role right at the heart of community life.
Before explaining in detail the merger of Lloyds TSB, I want briefly to describe the two companies and to say something of their respective backgrounds. The TSB movement was started in 1810 by the Rev. Henry Duncan in the small Dumfriesshire village of Ruthwell, as a means of improving the financial position of what were then termed the labouring classes.
One might think that there was an element of 19th-century paternalist do-gooding in that, but Henry Duncan's motivation was straightforward and genuine enough. As a result of his and others' endeavours, savings banks were established throughout the United Kingdom, and an early precursor of the savings culture that the Government want to build today was created. From the 1840s onwards, the savings banks' funds were secured by the Government—hence the name Trustee Savings bank.
Although the savings banks began to explore the possibility of providing commercial services in the 1920s, it took more than 50 years for them to come together to form a modern clearing bank in 1976. At flotation in 1986, there was a massive expansion of the company's equity base, as small shareholders, including many staff, began to share in the benefits of the business: 25,910 staff and company pensioners applied for a staggering 97 million shares.
By 1995, the TSB had grown to become one of the United Kingdom's leading bancassurers—that is, an integrated banking, life assurance and general assurance business—with branches throughout Britain.
Lloyds bank, or Taylors and Lloyds, as it then was, was founded in 1765 in Birmingham. By the 1880s, Lloyds was a major banking force in the midlands, and looked increasingly towards London. In fact, as long ago as 1771, the sons of the founding Birmingham partners had opened a bank in Lombard street in the City of London, and in 1884 that business was combined with the mainstream bank. Recently, the group acquired Abbey Life and the Cheltenham and Gloucester building society.
Before I explain why the group needs a private Bill, I want to give the House a renewed assurance on the separate status for the TSB in Scotland. Lloyds TSB has asked me to confirm that TSB Scotland's separate and special status, as provided for in the undertakings given to Parliament by the then TSB group in 1985, will continue to be honoured.
At the first annual general meeting of the new Lloyds TSB group in Edinburgh on 11 April 1996, Sir Robin Ibbs, the group's former chairman, said:
there will be no change in the status of TSB Bank Scotland … its Chairman will sit on the main group Board … the TSB Bank Scotland will remain headquartered in Edinburgh, and the Lloyds TSB Group will have its registered office in Scotland".
The group is committed to employing about 4,000 staff in Scotland, and last year expanded its business operations by opening 13 TSB and three Lloyds business banking centres to service the needs of the Scottish small business community. Only last week, the group's annual general meeting was held in Glasgow. I hope that that will reassure Scottish Members that Lloyds TSB is committed to serving all its customers in Scotland.
The need for a private Bill arises from the fact that a bank may not transfer a customer's money to another body without the customer's consent. Only through a private Bill can a bank's operations be merged without its going through the massive administrative task, and uncertainty, of seeking the agreement of each customer individually to a transfer of his or her account from one entity to another. In this way, 7 million TSB customers are also spared the accompanying inconvenience. That is the recognised way of dealing with bank mergers, and an average of one bank Bill each parliamentary Session testifies to that fact.
The Bill provides for the transfer to and vesting in Lloyds of the undertakings of TSB and Hill Samuel. Clause 3 allows the directors of Lloyds to name an appointed day on which those undertakings will be transferred to Lloyds and to name different days for each undertaking and for different parts of each undertaking. Clause 4 provides that, on the appointed day for an undertaking, it will transfer to and vest in Lloyds, which will in effect step into the shoes of TSB and Hill Samuel.
The rest of the Bill is designed to ensure that the transfer is effective, so that, once TSB and Hill Samuel have been transferred to Lloyds, Lloyds will be in the same position vis-a-vis third parties as TSB or Hill Samuel were before the transfer. By the same token, third parties that have dealings with TSB or Hill Samuel before the transfer will be no better and no worse off in their dealings with Lloyds.
Clause 6 contains supplementary provisions, including subsection (5), to the effect that any account between a customer and TSB or Hill Samuel will become an account between that customer and Lloyds after the appointed day. Clause 7 provides for contracts of employment, notably ensuring that, following the transfer, any contract of employment with TSB or Hill Samuel becomes a contract with Lloyds, as if the employment were a single, continuing employment.
Clause 8 relates to retirement benefit schemes, although it should be noted that it has no effect on the TSB group pension scheme, which is not part of the business or undertaking of Hill Samuel or TSB that is being transferred into Lloyds.
The Bill made steady progress through the other place. It received its First Reading in January 1997 and its Second Reading in March 1997. Following the general election and the summer recess, it went to the Committee on Unopposed Bills in November 1997, and received its Third Reading on 19 January this year.
As some hon. Members are aware, Lloyds TSB undertook exhaustive and free-ranging discussions about its future relationship with the Banking, Insurance and


Finance Union, BIFU, and the Lloyds TSB Union, LTU, as soon as the merger was announced. It successfully concluded agreements with both unions, to each party's satisfaction, during last year's summer recess.
The most significant features of the agreements were: equal recognition rights for BIFU and LTU in both the TSB and Lloyds banks; compulsory redundancy continuing to be a policy of last resort, with any necessary reductions in jobs coming from natural turnover, redeployment and voluntary means whenever possible; improvements when harmonising terms and conditions and guarantees on how the new terms will apply to new members of staff; and an agreed process for proposed branch reductions, whereby both unions are notified six months before any such closure.

Mr. Jim Cousins: Can my hon. Friend give us any assurance about what the agreed programme of closures might be in the short to medium term?

Mr. Illsley: I am sorry that I am unable to assist my hon. Friend in that matter now, but I am sure that I will be able to do so in correspondence. As far as I am aware, there will be closures, but Lloyds TSB has agreed the procedures with the banking unions. I also met the unions to discuss the issue and ensure that they were satisfied with what Lloyds TSB had proposed. Both the banking unions were happy with the suggested procedures for branch closures. Perhaps my hon. Friend can seek the unions' assurances.

Mr. Cousins: I am grateful to my hon. Friend, but he will recognise that, as representatives, we must be concerned—like my hon. Friend the Member for Blaydon (Mr. McWilliam)—about the impact on the services to our constituents and constituencies of a programme of branch closures. That is an entirely separate issue from whatever assurances may have passed between the banking unions and, now, their employers.

Mr. Illsley: I share my hon. Friend's concern. In my constituency, a TSB and a Lloyds branch are in close proximity. Obviously, it would make sense for the merged company to merge the two branches, closing one. However, we are talking about a de facto merger that took place two years ago. The Bill would simply give it legal status.
As I said, Lloyds has piloted a scheme to provide banks within branches of the Asda supermarket chain, and with the Post Office, to widen as far as possible access to the services that my hon. Friend's constituents desire through the widest possible network.

Mr. Cousins: I am grateful to my hon. Friend for giving way again; it may be best for us to proceed by means of a dialogue, rather than by making speeches. My hon. Friend briefly referred to the acquisition of the Cheltenham and Gloucester building society. Can he give the House some assurance about what the attitude of Lloyds TSB will be to the future of mutual institutions and to the employment and assets locked up in them?

Mr. Illsley: That matter is not affected by the Bill. The acquisition of the Cheltenham and Gloucester building society was based on the premise that it had a cost-income ratio of 26 per cent., making it the cheapest and most

efficient building society in the United Kingdom—hence the interest of Lloyds TSB. In comparison, at the time of demutualisation the Halifax building society had a cost-income ratio approaching 50 per cent. One can therefore see the advantages of buying the Cheltenham and Gloucester.
The point was to have that mortgage service—perhaps the most efficient of any building society—available to Lloyds TSB branches throughout the country; ultimately, it might then be available through supermarket branches and post offices. The acquisition was intended to make efficient, low-cost mortgages available to Lloyds TSB customers. As far as I am aware, at present demutualisation of the Cheltenham and Gloucester is not a policy. I may be able to reassure my hon. Friend further on that point in correspondence.
As I was saying, the relevant features of the agreements include an agreed process for proposed branch reductions, whereby both unions are notified six months before any proposed closure, and a reaffirmation of the assurances previously given regarding the TSB in Scotland. Against the background of the agreements reached with the unions and the assurances given to them, the unions withdrew their petitions after Second Reading in the other place.
During that period, pensions were discussed with the unions, and the Lloyds TSB group assured both unions that the benefits of the separate Lloyds and TSB pension schemes would remain unaffected by the Bill. The non-contributory elements of the schemes are some of the best funded in the United Kingdom and they provide an excellent package of benefits to pensioners. In addition to the strength of funding, the schemes—as one would expect from a major financial service provider—enjoy a comprehensive framework of statutory, regulatory and fiduciary safeguards for their beneficiaries.
The natural fit between TSB and Lloyds is multiplied in a geographical context. TSB has a concentration of branches in Scotland and the north of England, while Lloyds is strong in the south and west of England. However, the logic behind the merger was not merely one of geographical reach. Lloyds has a long tradition of providing business services for small and medium businesses, while TSB, with its tradition as a savings institution, has a particular expertise and strong presence in the personal account market.

Sir Raymond Whitney: The hon. Gentleman referred to the pension arrangements and, as I understood it, said that those were satisfactory. Can he explain why there is such widespread concern about the pension arrangements of Hill Samuel TSB former employees? We are talking about a company that now has a massive revenue—£.3 billion, I think?—with £1 billion in its pension fund and a tax holiday until at least 2015 for current employees, yet many of us have been told that former employees of Hill Samuel TSB are having to apply for welfare benefits.

Mr. Illsley: I hope to be able to deal with that issue later, but I can tell the hon. Gentleman that meetings have taken place as recently as this lunchtime and this afternoon at which the concerns of the Hill Samuel action group, which numbers about 200 people, were addressed by Lloyds TSB. The action group proposed the use of the Hill Samuel pension surplus. Those pensions are unaffected by the Bill and are not part of the assets that


are being transferred, but a separate entity. The action group asked to use about £500 million of the surplus available in the Hill Samuel scheme.
A few years ago, I requested from the Opposition side that the surplus from the mineworkers pension scheme be used for the benefit of former mineworkers who were on low pensions and had not been able to earn sufficient from the pensions scheme, which started in 1961, to live well. As the hon. Member for Wycombe (Sir R. Whitney) may recall, the previous Government refused that request. On privatisation of the coal industry, the surplus went straight into the Government's hands.
This issue is similar, and it is the one with which Goode committee dealt a few years ago. That committee was set up after the Maxwell pensions affair. Its recommendation was simply that a surplus in a pension scheme should be notionally owned by the organisation that supports the deficit; in other words, if the employer has to make good the deficit on any pension scheme, he takes responsibility for the surplus.
The action group's request for £500 million was unrealistic and against the recommendations of the Goode committee. The pensions of Hill Samuel pensioners are on average £12,000 per annum compared with the UK average of £4,700. I think that the Lloyds average pension payment is about £7,000 per annum. Those average payments show that the Hill Samuel pensioners are perhaps not as low-paid as the hon. Gentleman suggests. The hon. Member for Aldershot (Mr. Howarth)—who I see wants to intervene—and the hon. Member for Arundel and South Downs (Mr. Flight) today met the deputy chief executive and members of Lloyds TSB. They have been sent a letter that deals with many of the concerns of the Hill Samuel action group.
The letter refers to the position of pensioners on low incomes. Lloyds TSB maintains that it shares the concern that exists. In fact, the company makes ex gratia payments, not out of the pension scheme but out of its funding, to pensioners on poorer pensions—those over 75 with more than 10 years' service. The payments come out of the bank's profit and loss account and not the pensions scheme, which is not reduced by them.
Lloyds TSB states in the letter that it is "sympathetic", that it is
seeking to improve the position of such pensioners",
that it wants to ensure that any additional payments are not affected by the removal of social security benefits on a pound-for-pound basis, and that it will
undertake a comprehensive review to examine the position of such pensioners in order to determine how their pensions can be increased within Inland Revenue guidelines and without reducing their Social Security entitlements … We anticipate that the review will take approximately six months to complete.

Mr. Gerald Howarth: The hon. Gentleman accurately said that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) and I had a very long meeting with senior executives of the bank. It needs to be put firmly on the record that, although the action group suggested that a substantial part of the pension fund surplus should be used to ameliorate the position of poorly paid pensioners, that was an opening gambit to try to get the bank to talk and resolve the issue

as quickly as possible. The bank's ex gratia payments averaged about £460. We are not talking about a huge sum. I believe that that was a lump sum.

Mr. Illsley: It is more than the mineworkers get. We asked for their pension fund surplus to be used to provide better benefits for mineworkers. They did not get ex gratia payments at all.
We must consider what the action group is asking for in context. The whole matter was debated at the time of the Goode committee. In opposition, I called for the previous Government to divvy up the surplus in the mineworkers pension scheme for the betterment of the lower-paid pensioners. My request was refused by the Government whom the hon. Gentleman supported.

Mr. Howarth: In my previous incarnation, I represented a number of mineworkers. I think that I would have supported the hon. Gentleman.

Mr. Illsley: I am sure that the hon. Gentleman would have spoken well in support of the mineworkers in his previous incarnation.

Mr. Peter Brooke: Can the hon. Gentleman say whether the negotiations with my hon. Friends the Members for Arundel and South Downs (Mr. Flight) and for Aldershot (Mr. Howarth) are part of the statement issued by the promoters, or a new development resulting from the blocking motion?

Mr. Illsley: They are not a result of the blocking motion. There have been some half a dozen meetings between Lloyds TSB and the Hill Samuel action group. I think that the last took place on 16 April. Lloyds TSB has tried to meet the action group and identify the issues that it wants to raise. The hon. Members for Arundel and South Downs and for Aldershot raised concerns as recently as today. The negotiations are not a consequence of the blocking motion, because the meetings took place before it was tabled.

Mr. Brooke: I see no specific allusion to the continuing negotiations in the statement issued on behalf of the promoters in support of the Second Reading of the Bill. The hon. Gentleman is moving Second Reading, so I do not think that this matter should be dealt with in a winding-up speech.

Mr. Illsley: The Hill Samuel action group and the Hill Samuel pensions are not part of the Bill, and therefore cannot be part of the statement. The negotiations took place alongside the passage of the Bill but, because they are not part of the Bill, they are not in the statement. The assets transferred under clause 8 are the assets of the Hill Samuel bank and the TSB bank, not the pension schemes, which stand alone and remain so within the group. I hope that that answers the right hon. Gentleman's point.

Mr. Cousins: I have been following the discussion closely. Does my hon. Friend agree that the presentation of the issues in paragraph 22 of the statement is less full than it should have been in these circumstances, and that it would lead hon. Members to conclude that those issues were irrelevant or had been completely resolved, when they were still under negotiation?

Mr. Illsley: I believe that the statement was put together last week in preparation for this debate. It was


sent to the Vote Office to be ready and available for hon. Members this evening. The negotiations continued as recently as today. I have a copy of the letter sent to the hon. Members for Arundel and South Downs and for Aldershot. With their agreement, a copy can be made available to my hon. Friend. It met many of the concerns of hon. Members who supported the action group.

Mr. McWilliam: Some hon. Members are worried that the explanation that we have been given seems to fly in the face of the realities of the fiduciary duties of pension scheme trustees. As a former chairman of a pension scheme, I am well aware of them. Paragraph 15 states:
The assets do not form part of the assets of either TSB or Hill Samuel.
Such assets are not allowed to do so under the law of the land. The trustees should control the assets for the benefit of the beneficiaries of the schemes and not for the benefit of anyone else. Given the statement and what we have heard so far, I believe that there is concern that that may not necessarily happen.

Mr. Illsley: I reassure my hon. Friend that the pension assets are not transferred by the Bill. They are not in the Bill. He is right to say that the trustees of the schemes are responsible for the pension scheme and have those duties. The scheme that is the subject of the action group is not in the Bill. As I tried to point out, Lloyds TSB Group has tried as far as possible to accommodate the concerns of the action group and of hon. Members who have added their names to the blocking motion. The letter sent today to the hon. Members for Arundel and South Downs and for Aldershot reflects the outcome of their long meeting with Lloyds TSB's deputy chief executive, and can be made available. That letter addresses those anxieties.
Pensioners on low incomes are the concern of the action group. The letter from the deputy chief executive refers to
a comprehensive review to examine the position of such pensioners in order to determine how their pensions can be increased within Inland Revenue guidelines … We anticipate that the review will take approximately six months to complete".
On security of pension schemes, the letter says that Lloyds TSB is
concerned to ensure that the position of pensioners remains fully protected in all circumstances. As you know, there is a comprehensive framework of statutory, fiduciary and fiscal protections in place for members of all of our pension schemes, for the benefit of scheme members.
It is all in the letter, and reflects the meeting this lunchtime.

Mr. McWilliam: My hon. Friend does not understand. There are two problems. First, if the Bill becomes law, the company trustees on the pension scheme, who will form a majority, will be appointed by the new company. Secondly, the company contributions to those schemes could be adjusted. That has happened before. British Telecom took a pensions holiday instead of transferring the benefits to the beneficiaries. That could easily happen in this case. There is nothing in the Bill to prevent that or to prevent the management from appointing the chief executive, who may be a member of the scheme, and giving him a massive salary the year before he retires; suddenly, he will have raided the scheme. There are no safeguards. My hon. Friend must address those points.

Mr. Illsley: With the best will in the world, I am trying to address them. The pension schemes are not in the Bill.

They are unaffected; before and after the Bill, they remain the same. Lloyds has given the assurance that the pension schemes will remain unaffected. The fears voiced by my hon. Friend, although legitimate, are not real.
To address the point that was the subject of the blocking motion, Lloyds is trying to deal with the issues raised by the action group, such as the problem of low-paid pensioners under the Hill Samuel, Target Life and other pension schemes. Lloyds is very conscious of pensions issues. That was shown by the meetings over the past few weeks—as late as this lunchtime—and by the letter that has been made available. I have gone as far as I can to reassure hon. Members that the pensions remain unchanged.

Sir Raymond Whitney: The hon. Gentleman is resting much of his case on the fact that the £1 billion-plus pension scheme is distinct from and not part of the Bill, and we accept that technical point. However, when the House considers the ramifications of the new development, it is entirely germane for us to take account of the fact that the present employees of Lloyds TSB are to give themselves a tax holiday until at least 2015; at the same time, we are informed that several former employees of Hill Samuel and TSB are suffering to the point where they have to have recourse to social security benefits to supplement an extremely meagre pension; and that is happening against a background where, for example, the chief executive and senior executives of the former Hill Samuel were awarded significant pension and salary increases. The technicality of the pension fund not being part of the Bill is not enough to satisfy the concerns that have been expressed and echoed by hon. Members on both sides of the House this evening.

Mr. Illsley: I take on board the hon. Gentleman's point; however, it is not a technicality but a fact of life that the pension schemes do not fall within the Bill and are not affected by it—they remain as they are. There will be a pensions holiday, as there are in many well-funded pension schemes—in the case of the mineworkers pension scheme, British Coal took both a pensions holiday and the surplus from the scheme. It is not unknown for there to be surpluses in pension schemes.
The point which I am trying to make is that the pension schemes are unaffected, but the concerns that have been raised by the Hill Samuel action group have been taken into account by Lloyds as far as possible. Lloyds has repeatedly asked the Hill Samuel action group to provide details of the anomalies referred to in the letters circulated to hon. Members, but, as recently as today, the action group has not come forward with a single example. Lloyds has repeatedly asked for information on those anomalies.
The hon. Member for Aldershot is holding up a piece of paper, but why does he not send it to Lloyds? Why did he not give it to Lloyds today? Why has information on the anomalies not been made available? Hon. Members have had the opportunity to raise those issues with Lloyds, as has the action group, but at a meeting on 16 April, those anomalies were not presented.
I am trying to get the message through that Lloyds is addressing the issues. Conservative Members have received a letter from Mike Fairey, the deputy chief executive of Lloyds. Lloyds is trying to address the issues, which are in a sense separate from the pension scheme,


which is unaffected by the Bill. The Hill Samuel action group is using the passage of the Bill to try to address its members' concerns about their pensions, but the Hill Samuel pension scheme does not come within the Bill. As I have pointed out, the average Hill Samuel pension is £12,000 per annum, compared with a national average occupational pension of £4,700. When the Hill Samuel action group comes forward with some concrete examples as part of the review offered by Lloyds, I am sure that they will be taken into account.
I have digressed a little from my speech, but in doing so I hope that I have addressed the concerns of my hon. Friends and Opposition Members. I was talking about the geographical and business set-up of Lloyds TSB and the merger. The TSB, with its tradition as a savings institution, has particular expertise and a strong presence in the personal account market; Lloyds is a strong player in the retail mortgage market after the Cheltenham and Gloucester acquisition; and TSB possesses a successful general insurance underwriting business. The natural synergies between the two banks have turned Lloyds TSB into the most successful financial services group in the European Union.
Generally, the group's staff have seen their job prospects improve as there are broader career opportunities for those working within a stronger organisation. They have also gained through the rising share price of the company: 70,000 members of the group staff and pensioners are members of the company's save-as-you-earn scheme for buying shares.
Lloyds TSB's 15 million customers have also gained significantly from the merger. They now enjoy access to the largest branch and cash-dispensing machine network in the United Kingdom: Lloyds TSB has 2,700 branches—30 per cent. more than its nearest competitor—and 4,220 cash-dispensing machines. Customers have the use of both TSB and Lloyds cash machines without charge and access to Cheltenham and Gloucester building society mortgages in both Lloyds and TSB branches.
For business customers, the group's combined spread of business centres will enhance the service provided to business users, especially small businesses. In parts of the country where TSB is under-represented, TSB small business managers will work from Lloyds bank branches offering small business services to TSB customers; previously, that service was not generally available.
Lloyds TSB's business is rooted in local communities throughout the United Kingdom, and it believes that it has a responsibility to help the communities it also serves as a business. If communities are affected by economic and social deprivation, so too is the health of Lloyds TSB's business. Lloyds TSB foundation will this year distribute £21.1 million, making it the largest grant-making body in the UK after the Diana Princess of Wales fund. The work of the foundation focuses on supporting charities, especially small, local grass-roots charities, which enable people—especially disadvantaged and disabled people—to play a fuller role in society.
That support ranges from pensioners clubs in Newnham to a disabled access co-ordinator at the British museum. In 1997, more than 3,300 local charities received support from the foundations. The group also positively encourages staff fundraising through a matched giving scheme. From sponsored sheep shearing to bed races, the

group matches staff fund-raising activities pound for pound; in 1997, £900,000 was raised for the community in that way.
Lloyds TSB has been working closely with the Department for Education and Employment since the end of 1996, having seconded members of its staff to the DfEE, to ensure that new deal applicants have every possible opportunity to work for Lloyds TSB. Lloyds TSB plays a significant role in supporting the education system: 600 members of its staff are school governors, so it is not surprising to hear that the group is developing a qualification for school governors in partnership with Essex county council's governor development team.
In addition to all that, Lloyds TSB is promoting excellence in schools through its "quality in education" programme. The business excellence model used extensively with Lloyds TSB has been adapted for use in 300 schools and colleges through a pilot programme. Lloyds TSB has worked in partnership with more than 30 local education authorities to increase excellence in schools. In another move to promote a progressive approach in pursuit of academic excellence, Lloyds bank has initiated an education service "next steps" pack aimed at 16 to 18-year-olds in school. It combines traditional student notes with an interactive CD-ROM designed to prepare students for university life.
It is not only in pursuit of broadening and deepening the skill base that Lloyds TSB makes its mark; the group is also active on the rugby field and has recently begun a three-year sponsorship of rugby union. As part of that programme, the group is supporting rugby's development in Welsh schools and, in the near future, that programme will be rolled out to include England and Scotland as well.
Lloyds TSB is one of the largest companies in the United Kingdom, and is also one of Britain's world-beating companies. Its support for grass-roots community-based projects is unrivalled by any other UK company. It leads the City in its support for the Government's welfare-to-work initiative. It is creating wealth for the country—more than £500 million in tax went to the Treasury this year-for its staff, for its customers and for its shareholders, 70,000 of whom are members of staff.
The merger between Lloyds and TSB is supported by more than 80,000 staff, 15 million customers, 1 million shareholders, the Bank of England and both staff unions—the Banking, Insurance and Finance Union and the Lloyds TSB Union. By anyone's standards, that adds up to overwhelming public support for the merger, and I look to the House to allow 15 million stakeholders to gain from the merger of Lloyds and TSB.
Several hon. Members rose—

Mr. Deputy Speaker (Mr. Michael Lord): Before I call the next speaker, I remind the House that, although I have allowed a number of lengthy interventions on the question of pensions, pensions are not the principal subject of tonight's debate, which is the Second Reading of a different matter.

Mr. Howard Flight: As the hon. Member for Barnsley, Central (Mr. Illsley) explained at length, the Bill's purpose is to complete the merger between Lloyds and TSB and, as I understand the position, it especially concerns the use of premises, the


rationalisation of premises, and the ability of staff from either side to operate mutually from either Lloyds or TSB premises. I believe that, for reasons best known to Parliament, banking is the only industry for which a private Act of Parliament is required in the event of a merger.
I crave your indulgence a little, Mr. Deputy Speaker, to explain how my involvement came about. A constituent is one of the main parties leading the TSB Hill Samuel action group. I became involved in supporting the blocking motion as a result of an investigation of the points raised by the group.
I believe that there is a technical issue as to whether there is a locus standi in relation to the Bill. I read out the advice of an eminent law firm, to the effect that the purpose of clause 8(2) of the Bill is indeed
to rationalise the pension schemes of Lloyds and TSB with the logical consequence that all schemes be merged at a future date.
Therefore, although there is legal controversy as to what clause 8 is about and its precise relevance, there is a legal case that part of this merger Bill touches on the arrangements relating to the pension schemes—and the ability to merge the pension schemes. When merging two significant businesses, it is good practice—in terms of corporate governance, if nothing else—to study the pension schemes and ensure that the arrangements are satisfactory. If one does not do so, one is bound to receive complaints later when, inevitably, the pension schemes are merged.
Three separate issues regarding the pension arrangements worry me. The first is that of poor pensioners, who are drawing social security when the pension scheme has a surplus of about £850 million. The second is to what extent the TSB pension scheme is effectively ring-fenced in future; and the third is the extent to which there are anomalous cases, within the TSB scheme, where treatment had differed among categories of staff who had either had their employment transferred or who were deferred pensioners because they had been made redundant.
The letter that my hon. Friend the Member for Aldershot (Mr. Howarth) and I have received, following a further meeting this morning, goes a reasonable way to addressing those issues. Looking beyond that, it also raises quite an important point for the House, because among the crucial issues is the extent to which pension schemes can address the issue of poor pensioners within the Inland Revenue rules.
Practices appear to differ somewhat—depending on which Inland Revenue officers the arrangements are being discussed with—as to the extent to which the implications of the two-thirds rule can be waived when people are on a very low income. However, I confirm that the Lloyds TSB management have—to my mind, in good faith—carried out a full investigation and undertaken, in good faith, to negotiate, as best they can, with the Revenue to the advantage of pension scheme members, in order to address the issue of poor pensioners within the pension scheme.
Similarly, the law already goes a long way to protect the interests of one group—in this case, TSB pensioners—but there is in that letter an undertaking that we had requested. It makes a proposal that is healthy and correct in relation to a business that is likely to have many deferred pensioners. The proposal is that Lloyds TSB should consider appointing a trustee who represents

deferred pensioners, so that the board of trustees and of the pension scheme is more fully representative of all participants in that scheme.

Mr. Cousins: I am extremely interested in what the hon. Gentleman is saying. Is he in a position, as a result of the discussions that he has had, to give the House an assurance that there will be such a trustee, or is that still to be negotiated and agreed?

Mr. Flight: I am certainly not in a position to give such an undertaking—I am not part of the management of Lloyds TSB. However, to that suggestion, the response by Lloyds TSB has been:
we will also consider the possibility of the appointment of a deferred pensioner to the board of the TSB pension scheme
in the light of a suggestion that we made. I should like to think that, when the Bill passes into Committee, Lloyds TSB can make a firmer commitment, having at this stage undertaken to consider the proposal. I believe that the response was in good faith, and that the point was seen that the business has very many deferred pensioners, and that it is appropriate that they should be represented on the board of trustees.
Anomalies appear to exist between people who have been made redundant at similar levels of seniority and among people whose employment has been transferred. There is a further issue as to whether women employees have been treated on an equal basis to male employees. The undertaking by Lloyds is that the TSB Hill Samuel action group will be invited, with its support, to invite anyone who feels that they are an anomaly—that they have not been treated fairly—to present their case to Lloyds TSB. Lloyds TSB will appoint a specific officer suitable in terms of actuarial expertise and knowledge of the pension fund to prepare the material and to look into such cases, and the management have also said that they will undertake to furnish full evidence to the pensions ombudsman if internal agreement cannot be reached.
I am not entirely clear whether the pension ombudsman is the ideal party to be the ultimate referee in such a matter, or whether it would be more appropriate to have an independent actuary. However, those are the three key issues relating to the position of TSB pensioners that arise because, although the major purpose of the Bill is the merging of premises and operations, beneath it, and to some extent included in it, are measures for the merger of the pension schemes.
The objectives of the TSB Hill Samuel action group were to address three specific problems: poor pensioners; anomalies; and ring-fencing protection. The responses from Lloyds TSB go a long way, and probably about as far as one can go practically, for the reasons given by the hon. Member for Barnsley, Central. In Committee, I hope that we shall be able to monitor progress. Lloyds has undertaken to advise my hon. Friend the Member for Aldershot and me of the anomalies that come up and how they have been dealt with.
The most important reasons behind my initiation of the blocking motion have, at the very last hour, been dealt with reasonably by Lloyds TSB. Therefore, I have no wish to stand in the way of the wider rationalisation of the business that is the essential purpose of the Bill. Still, I hope that the House will have the opportunity to review progress on some aspects of what has been promised when the Bill reaches Committee.

8 pm

Mr. Jim Cousins: I declare an interest as a customer of the Trustee Savings bank of more than 30 years. I also draw to the attention of the House the fact that the Manufacturing, Science and Finance Union supports my constituency. I am not aware of any involvement by that organisation in Lloyds TSB, nor have I received any representations from it. I merely draw attention to the fact in the interests of openness.
The House rarely gets an opportunity to discuss the rapidly developing nitty-gritty of our financial services. I hope that, as Government legislation proceeds in this Session and the next, we may have other opportunities to return to those matters. It is sometimes necessary for hon. Members to use opportunities such as this to bring before the House matters that can appear arcane; indeed, the whole procedure might be described as a contrivance. Be that as it may, if this is the only opportunity we have, then we must use it.
My hon. Friend the Member for Barnsley, Central (Mr. Illsley) and the hon. Member for Arundel and South Downs (Mr. Flight) have already mentioned the importance of the Lloyds TSB merger. It is a significant financial institution, not just to this country but across the world. In this House, we have all too few opportunities to discuss those great financial institutions. The Bill comes before us at a time when global financial services are exploding, and there is a great deal of volatility and uncertainty around. It is thus entirely proper that hon. Members should raise the concerns of particular communities, constituencies and individuals in the context of such spectacular institutional developments.
In the light of the discussions that I have had with my hon. Friend the Member for Barnsley, Central and of the information that the hon. Member for Arundel and South Downs has given us, I do not feel the need to go into the subject in any great detail; I simply register the point that it is entirely proper that Members should use these opportunities to force some discussion.
This is by no means a trivial matter. In the context of the emergence of a single group of employees and the amalgamation of property, it is quite understandable that hon. Members should wish to discuss the importance of branch networks to their communities—not to mention the employment created by those networks and the services that they represent. It is beyond dispute that Lloyds and TSB branches sit side by side, so we are entitled to seek an assurance from the promoters that employment will not be lost as a result of the Bill.
What we have been told tonight, and common sense, shows us that some employment will be lost as a result of the merger. We are entitled to press the case of the employees, and to make the point that any reduction in those networks, and in the services they represent and the employment they create, should be kept to an absolute minimum—especially at a time when the Government are proposing imaginative developments in an area of financial services in which Lloyds TSB may want to play a part. I hope that, by the time that the Bill returns to us, there will be a general outline of the assurances we seek.
My hon. Friend the Member for Barnsley, Central referred to the acquisition of the Cheltenham and Gloucester building society. Many Members are extremely worried about the integrity of the remaining insurance and building society mutual institutions. What

will be the likely attitude of this huge merged institution to the acquisition of such mutual institutions? What will be the general strategy of the merged institution to the integrity and independence of the remaining mutuals? We need some answers before the Bill enters Committee.
Of course, one can see the financial advantages to Lloyds TSB of being able to acquire a building society; that enables it to offer a wider range of services, including mortgages. We are nevertheless entitled to ask the promoters about their longer-term intentions to the acquisition of mutual institutions, whether in the insurance or the building society sectors. We have been given some welcome signs of the intentions of the merged institution this evening—for instance, the creation of a pilot scheme allowing access to savings and financial services through the Post Office. We are entitled to ask for more information of that kind: how does the scheme fit in with some of the Government's proposals to extend the habit of saving to parts of the population that have no net financial assets at all? Again, I hope to have some information about the attitude of Lloyds TSB to those issues before the Bill returns to us in Committee.
During the past week, the Government have made some welcome proposals in Newcastle for health action zones and education action zones—this in a city with a long history of commitment to the TSB and the trustee savings bank movement. I am entitled to press the case for some specific commitments on the part of Lloyds TSB to those Government initiatives, both in my city and on Tyneside generally. I hope that my hon. Friend the Member for Barnsley, Central and the promoters of the Bill will take due note of my remarks.
In my closing remarks, I return to the subject of pensions. I am conscious of your advice, Mr. Deputy Speaker, that they do not directly and explicitly form part of the topic of the Bill, and I shall not dwell on them unduly. As my hon. Friend the Member for Barnsley, Central made clear in his appropriate and general riposte to Opposition Members, there is a principle behind the specific proposals: that pension funds are not simply financial assets to be deployed by their owners in any way that may be chosen. They are the deferred income of the contributors.
That is the principle that we established in the Goode Committee report. That is the principle, to which my hon. Friend correctly referred, that was at issue in the mineworkers pension scheme changes that he so much, and in my view properly, regrets. That is the principle that we must preserve. If it produces some apparent peculiarities—there may be pension funds that are asset-rich—so be it, but the principle must be preserved, because it means so much not just for the employees of Hill Samuel and Lloyds TSB, but for pensioners everywhere. Hon. Members should not take the matter lightly or pass up an opportunity to register the point.
A particularly significant aspect of the proposals is the need to respect the rights and interests of deferred pensioners. In today's flexible labour market, deferred pensioners are becoming an ever-growing client body of pension schemes whose proper interests are too little recognised and too often ignored. The sign that there may be a specific representative of the interests of deferred pensioners on the trustee bodies of the pension scheme is important. I hope that that will happen.
In my attitude to Second Reading, I shall be guided by the remarks of the hon. Member for Arundel and South Downs. I shall bear in mind the account that he gave of his discussions today with Lloyds TSB. That will greatly influence my actions tonight.
The subject matter that forms part of the Bill is not some arid technical detail. There are important human principles involved that matter to many hon. Members. If the debate has given hon. Members on both sides an opportunity to raise those matters and to register those points with a great financial institution, the House of Commons will indeed have been doing its duty.

Dr. Vincent Cable: Like several hon. Members, I was drawn to the debate by the concerns of the action group, and its members in my constituency and in the constituencies of my parliamentary colleagues. It has become clear from the debate, especially from the effective contribution that we have just heard from the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins), that there is a wider context that we must address—the merger process in the banking sector, and its implications.
Some of the forces driving that process are inevitable or desirable, and we should endorse those factors. An enormous process of technological change is clearly under way, and it is altering the face of retail banking. I have in my constituency the multimedia centre of one of the big banks that is developing internet banking, which will make much of the face-to-face contact in retail banking superfluous in years to come. In addition, as the hon. Member for Newcastle upon Tyne, Central described, an international process is taking place. What used to be a national industry is becoming international. That helps to explain the logic behind the Bill coming before the House.
We should not be deceived into taking such matters on the nod. There is undoubtedly a purely financial phenomenon taking place. There is at present a shareholder bubble in the financial sector which has driven bank shares up to extremely high and probably unsustainable levels, in the process making shareholders very well off, but fuelling the merger mania that surrounds the financial sector, often with questionable benefit.
It has been suggested that the House has a unique constitutional role in looking at merger activity in the financial services sector. No one has explained to me as a new Member how that originated, but it seems to me to be a valuable part of the scrutiny process, and we should take advantage of it.
It seems a little odd that, in such a major merger, the only legal considerations that have been entered into hitherto are the interests of the shareholders and the directors. It is a good discipline to ask whether customers benefit. The House is effectively being asked to deliver the customers, and we should act for them. It is not entirely clear that bank customers have benefited from merger activity in the past. Customers have often experienced slipshod services and rising costs, and that should be questioned. That is part of the scrutiny process in the House tonight.
The hon. Member for Arundel and South Downs (Mr. Flight) and others have dealt well with the pensions issue. The hon. Gentleman made a useful distinction

between the concerns of the present—concerns about past disparities between different groups of pensioners in the TSB Hill Samuel fund and the poor pensioners, and the ring-fencing problem.
There is a little more to be said about the ring-fencing issue. There will be serious challenges to the trustees of the pension fund in future from two directions in particular. First, if this bank merger proceeds like most others, waves of redundancy will follow. Many current bank employees will be made redundant. The issue of deferred pensions and the need to protect them will be important.
The second issue, which the hon. Gentleman did not mention, is that this is probably not the end of mergers and acquisitions in the retail banking sector. There is already a good deal of speculation in the City about the possibility of mergers between one or other of the big four, involving possibly Lloyds TSB and Barclays, National Westminster or Hongkong and Shanghai Banking Corporation. That could well happen, and we need to be assured that the pension arrangements contained in the Bill will be protected in any future change of ownership arrangements.
In the course that we now take, we are guided by those who have been negotiating on behalf of the action group. I welcome the opportunity to put on the record the interests of the action group and the wider concerns about where this financial amalgamation is leading.

Mr. Gerald Howarth: This is proving to be a useful and interesting debate. I am reinforced in my conviction that I was right in the first place to join my hon. Friend the Member for Arundel and South Downs (Mr. Flight) in adding my name to the blocking motion, so that the matter could be aired and the issues arising from the merger could be considered in greater detail than the House is usually able to do.
I make it clear from the outset that it was never my intention to stand in the way of a commercial decision by the shareholders of the relevant institutions to join forces. I have a background in the City. Before I entered the House, I spent my last two and a half years in the City working for a merged bank, which was called Standard Chartered bank. I am aware that even today, there are those in the Standard Chartered bank who are the Standard bank people and those who are the Chartered bank people. I wish Lloyds TSB every success in merging, but I dare say that for a long time to come, there will be TSB people and Lloyds people.
It is not the role of the House to second-guess the commercial judgment about whether the shareholders were right to make that decision. However, it is right that we should have the opportunity of debating these issues. I was drawn to the debate because one of the leading lights in the TSB Hill Samuel action group, a chap called Billy James who was at Hill Samuel when I was at Standard Chartered, and who took me through the intricate business of interest swap deals, raised the issues with me.
I do not for a moment claim to be a pensions expert, but I understand something about the politics of the issue, which has caused concern throughout the House and among former employees of some of the constituent parts of the proposed merged group.
I do not think that the bank has addressed the politics of the move properly or effectively. Dismissing the action group as simply representing 200 people and questioning its motives are not favourable grounds for launching an assault on that group's case. In large measure, the action group comprises former senior executives of the bank. The former chairman of Hill Samuel bank, Sir Robert Clark, is chairman of the action group, and he is not a man to be dismissed lightly. I do not think that it is good politics to question the motives of people such as him. He and his colleagues have been anxious to draw to the attention of the House the difficulties experienced by poorer pensioners.
The politics seems fairly straightforward: a pension fund had almost £1,000 million in surplus and the employer declared a contributions holiday not for three, five or 10 years, but for nearly 20 years. That is a long time. I have been told that pensioners belonging to the pension fund of the world's most profitable bank—Lloyds bank—were claiming or were eligible for income support. That is something of an affront, and the problem should be addressed.
It is not sufficient for the bank to say, "We were constrained by rules that apply to other pension funds." The House cannot ignore that situation, and clause 8 addresses the question of pension funds. It is not sensible politics for poorer pensioners to claim income support when there are huge top-ups to the pension funds of former and existing directors. The Bill's sponsor, the hon. Member for Barnsley, Central (Mr. Illsley), has told us that £460 is being made available to poorer pensioners. I do not think that the politics of that decision is favourable.
The hon. Member for Barnsley, Central was correct in saying that the action group has sought to use the passage of the Bill through the House to draw attention to its concerns. It has made no secret of that fact: that is precisely what it is doing. It is unfortunate from the point of view of the bank, its employees and shareholders that, unlike other commercial amalgamations, the procedure is subject to the approval of this place. The hon. Gentleman explained very lucidly—I must confess that it was the first time I had heard it—exactly why the banks must do it this way. In a sense, that is bad luck for the bank concerned.
One of my constituents is a senior executive of the bank, and he appreciates the rationale underlying the merger. We do not wish to impair the effectiveness of our financial institutions or the City. They make a tremendous contribution to the British economy and we do not want them to be constrained. My constituent believes that it is unfair that pension anomalies or the problems of the pensions industry should be resolved on the back of this Bill. I understand his point of view, but we cannot ignore what is before us.
My hon. Friend the Member for Arundel and South Downs and I are grateful to the senior management of Lloyds TSB for sparing considerable time today—they spoke to my hon. Friend last week as well—attempting to address the concerns that we relayed on behalf of the action group. The management made several very fair points, not least of which is that this pension fund is only one of about 14. This pension fund is significant because it is in substantial surplus.
The only other fund in a comparable position is the Lloyds bank pension fund, which I believe is in surplus to the tune of £1.1 billion. However, that pension fund has more members than the TSB Hill Samuel fund. There is a pension holiday in that fund as well. Senior management pointed out that any treatment of anomalies or improvements in the lot of those on small pensions in the TSB Hill Samuel fund would, in equity, have to be dealt with across the range of other pensions in the enlarged group. I understand that argument.
As my hon. Friend said, we obtained certain undertakings today, for which we are grateful, and we received a letter from the bank, which has been referred to frequently this evening. Although that letter was sent to my hon. Friend and me—it is marked "strictly private and confidential"—I am glad that the hon. Member for Barnsley, Central was able to read it into the record. I am sure that he was right to do so. We are invited to accept those undertakings in good faith, but I believe that they should also be given to Parliament, as the legislation is before the House. I invite the hon. Member for Barnsley, Central to agree with senior people at Lloyds TSB that the undertakings given to my hon. Friend and me should be made specifically to the House. That would be extremely helpful.
My hon. Friend the Member for Arundel and South Downs mentioned the key issues as far as we are concerned. We understand that the fund cannot be ring-fenced. I am grateful to Mike Fairey, the deputy chief executive of Lloyds TSB, for pointing out that the bank would not contemplate using the assets of one fund—particularly this one—to bolster another less healthy fund. We seek some assurance that the bank does not envisage having to seize part of that surplus in the foreseeable future to bolster a weaker pension fund. Such an assurance would go a long way towards meeting the concerns of the action group.
I am conscious of the fact that the fund is not the property of the members: it comprises contributions from the bank over the years. As we are invited to understand from the advertisements on Classic FM and elsewhere, investments can fall as well as rise. The fund is enjoying a substantial surplus at present, in part because of the state of the market.
However, it is worth reinforcing the point made by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) that these pension funds represent the deferred incomes of employees. In exchange for accepting a lower salary when they joined the bank—many TSB employees were on low salaries compared with those offered by other banks—the deal was that they had jolly good pension arrangements. One could argue that those pension arrangements may have influenced people's decisions to join that institution.
The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) and my hon. Friend the Member for Wycombe (Sir R. Whitney) made the point that, although the scheme is not being transferred—it remains intact—the trustees will be appointed by the bank. Perhaps the hon. Member for Barnsley, Central can assist me on this point. Once the legislation is passed and the merger is completed, the bank will be able to nominate its people to serve on the board of trustees. Although they will not be in the majority, they will nevertheless enjoy parity with the chairman and other members who will constitute the board, as we discussed before lunch today.
The power of the new, merged bank to appoint its nominated trustees would clearly move from TSB Hill Samuel to the new bank of Lloyds TSB. If the hon. Member for Barnsley, Central can give us an undertaking that the bank will make clear its intentions vis-a-vis the fund to the House rather than to my hon. Friend the Member for Arundel and South Downs and me, that would be welcome.
The hon. Member for Barnsley, Central said that ex gratia payments were made to a number of low-paid pensioners. However, these payments were not hugely significant. I have some examples of inequalities, which were sent by Billy James to Lloyds TSB on Friday. The paper that I was waving earlier was in the hands of Lloyds TSB, and I quoted part of it this morning. If a former secretary aged 70 with about 15 years of service is receiving £102 a month, how does that sit with someone like Hugh Friedberg, who picks up £650,000 of enhancement to his pension? There must be some equity. The concern of some of us that there is not equity has brought us to question the passage of the Bill.
We are told that a pensioner with 29 years of service, now aged 83, is too proud to disclose her exact pension, but admits that it is well below the poverty line. The pension scheme representatives suggested that she should approach the bank's benevolent fund to pay for her hearing aid. Come off it! We are talking about the richest or most successful bank in the world, so we are told. Such issues must be seriously addressed because they represent poor politics.
I do not claim to understand all the intricacies of the Inland Revenue rules. However, I know that the National Association of Pension Funds has suggested that the rulebook, containing about 1,300 rules, should be burned and thrown away, and that life might be much better thereafter. The bank, in good faith, should deal with the anomalies that have arisen.
There has been discrimination against women. I understand that one of the corporate financiers transferred to Close Brothers—she was transferred from the Hill Samuel corporate finance department—discovered that a male colleague of equivalent rank and length of service was being offered a deferred pension entitlement about 30 per cent. more than that offered to her. Inquiries were made and the relevant actuary admitted that as on average the promotion prospects of women were less good than those of men, female executives were offered lower deferred pension entitlements than their male equivalents. That is not fair, and the issue should be addressed. I hope that the hon. Member for Barnsley, Central will be able to do so.
My hon. Friend the Member for Arundel and South Downs referred to the suggestion that he made to the bank today that it should appoint a deferred pensioner to sit with the trustees of the fund. The bank has said that it will consider that. I invite the hon. Member for Barnsley, Central to consult the bank and ask it whether it will give a clear-cut assurance that it will appoint such a pensioner, rather than saying that it will consider so doing. It would not be a great commitment to give; indeed, it is one that the bank should be able readily to give. I ask the hon. Gentleman whether he will so consult the bank.
My hon. Friend the Member for Arundel and South Downs and I are relying quite substantially—I think that the House is looking to us to some extent because we are

in possession of information which, I may add, I saw only at 6 pm, through no fault of the promoter, because I was otherwise engaged—on the good faith of the bank in terms of what it has undertaken to do. I think that the bank should agree to the appointment of an independent assessor. The pensions ombudsman will not be too keen to act as a court of appeal. It would be better if an independent actuary were appointed, with the agreement of both sides, so that he or she could take up anomalies and the position of lower-paid pensioners. If that were done, there would be a considerable improvement.
The House has raised some important questions, and it is important to understand that there is real concern outside the House. I think that the bank is now aware of that concern and is anxious to resolve problems. It has demonstrated its good faith to us. If it can give the assurances to the House that my hon. Friend and I have received from it, enhanced as I have suggested to the House, the Bill is likely to have a swift passage.

Mr. Peter Brooke: It is a pleasure to be called after my hon. Friend the Member for Aldershot (Mr. Howarth). I shall come on to what he said, with which I broadly agreed, in a moment. The blocking motion tabled by my hon. Friends the Members for Aldershot and for Arundel and South Downs (Mr. Flight) is of considerable benefit to the House, in that it has provided us with the occasion for the debate.
I must declare a series of brief and fairly minor interests. About 30 years ago I was a consultant to Hill Samuel when it was an independent company. My wife is a shareholder in Lloyds TSB in a general personal equity plan, and I must say that it has done her very well. The corporate headquarters of Lloyds TSB is within my constituency. The bank has not sought to make any representations to me in a constituency capacity, other than those represented by the general vehicle of the statement issued on behalf of the promoters of the Bill, which was placed in the Vote Office. One of the senior Lloyds TSB executives, who is referred to in the Hill Samuel action group briefing, is one of my oldest friends. Finally, I am the chairman of the building societies' ombudsman council, which has not been without its passages of arms with the Cheltenham and Gloucester building society.
I came to the issue that is before the House, as have other hon. Members, including some of my hon. Friends, as a consequence of correspondence from constituents. The hon. Member for Barnsley, Central (Mr. Illsley) referred to the action group as consisting of only 200 people; indeed, the promoters' statement does likewise. I know that no one intended to be derogatory by quoting that figure, but those constituents who wrote to me were, in their day, household names in corporate finance. It seemed significant that they were writing, as much as on behalf of anybody, on behalf of the 600 or 700 pensioners who were being looked after under the present TSB arrangements.
I acknowledge the benefits that flow from rationalisation in the financial sector. The present stock market is considerably influenced in an era of price stability by the gains that can be made from the proposed rationalisation. I believe that, until the recent price fall,


Lloyds TSB had the greatest market value of any bank in the world. I recognise the need for the Bill. The hon. Member for Barnsley, Central spoke eloquently to its advantages and what would flow from it.
I recall that, in 1992, one of the factors that was thought to handicap Lloyds in making a bid for the Midland bank when the Hongkong and Shanghai Banking Corporation made its bid was that it would have to go through just such a Bill as the one that is before us, and would not be able to realise the benefits from the merger as quickly as the Hongkong and Shanghai would do from outside.
In addition to the impact on market behaviour, there will be an effect on customers in such circumstances, as the hon. Member for Twickenham (Dr. Cable) said. I have previously quoted in the House C. S. Lewis's observation that, if one hears of someone doing good to others, one
can always tell the others by their hunted expression.
When banks write to me about the benefits that will flow to me as their customer from a reorganisation of their affairs, I find that that is not always the case to the last iota, although I salute the TSB Foundation, which has done remarkable work and is a friend to hon. Members.
The pensions issue which has driven much of the debate comes back to old arguments about risk against reward. For a long time, commercial banking on either side of the Atlantic—I am looking back to before and after the war—was an industry in which people did not expect to be especially well rewarded, but were certain of a job for life. Market circumstances in the 1970s and early 1980s changed that. What was effectively an unspoken contract between employees and the banking industry—I am talking about the clearing banks—was inevitably disturbed and overturned. Ructions have subsequently flowed from that. Those observations apply obviously and particularly to TSB. Hill Samuel was in a different business where risks were greater but so were rewards, and there were pension differences, to which the hon. Member for Barnsley, Central referred.
Hon. Members have quoted material put out by the Hill Samuel action group about discrimination and fair treatment. The speed of events has created a gap in the briefing of the hon. Member for Barnsley, Central about what the action group has provided to Lloyds TSB in the past week. I do not hold that against him in any way, but there should be a sense of transparency and a perception that people are being fairly treated, especially in the climate of concern about pensions which the Government have clearly and directly reinforced.
Although it is alleged that the Bill has nothing to do with pensions, the sponsor of the Bill referred to pensions and clause 8 deals with retirement benefits schemes. There has been continuing activity and negotiation, but there was no reference to that in the statement that was put in the Vote Office. In the words of Sherlock Holmes, I am not left thinking, "These are deep waters, Watson," but they seem a little deeper than on first impression from the information that we were vouchsafed. My hon. Friend the Member for Arundel and South Downs says that there is a connection between the recent flurry of negotiations and the blocking motion, although the hon. Member for Barnsley, Central says that there is not.
I acknowledge the virtues of the Bill; given the current climate and perceptions, however, hon. Members would be failing in their scrutiny of such legislation if they took

everything on trust. That applies as much to the network, to which the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) referred, as to the pensioners. The hon. Member for Barnsley, Central should deal with an issue to which my hon. Friends and other hon. Members have alluded. In the Hill Samuel Action Group briefing, there is a parenthesis in the section that refers to the pension scheme surplus, which states:
Lloyds TSB appear to have told friendly current employees that the TSB Group Pension Scheme is already ring fenced, which it is not and which Lloyds TSB categorically refuse to do.
My hon. Friend the Member for Aldershot told us what the deputy chief executive said to him. It is not totally clear from that sentence in the briefing where truth lies. A specific contradiction of evidence is involved, so the hon. Member for Barnsley, Central would do the House a service if he dissected the sentence and said precisely where truth lies and why. We should find out what has been said to give that contrary impression.
I thank my hon. Friend the Member for Arundel and South Downs for his diligence in dealing with Lloyds TSB. As he said, we can return to the matter on Third Reading. I hope that, by then, Lloyds TSB will have concluded its consideration of whether to have a pensioner trustee, so that we shall know one way or another.

Mr. Illsley: With the leave of the House, Mr. Deputy Speaker, I shall address the concerns that have been raised: we have had a frank and open exchange of views; whether it has been generated by the blocking motion remains to be seen.
The hon. Member for Arundel and South Downs (Mr. Flight) was gracious in his comments about the meetings, and referred to issues in the letter, which should be taken at face value and in the spirit in which it was offered. I am sure that Lloyds TSB will honour assurances given in it.
I take on board the point made by the hon. Member for Aldershot (Mr. Howarth) that the letter was marked "strictly private and confidential". I have referred to it at length and apologise for that, but those references have contributed to the debate. I am sure that the assurances given by Lloyds TSB to hon. Members will count and that it will stand by them.
I agree with my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) that private Bills can be an obscure method of achieving an outcome, and could be described as a contrivance. Perhaps the procedure will be improved in the fulness of time. I also agree that the issues are not trivial and that interesting matters have been raised. I take on board what he said about employment issues. As a Member of Parliament, I have always defended employment and jobs, and would not have agreed to sponsor the Bill had I not been reassured on closures and jobs.
My hon. Friend the Member for Newcastle upon Tyne, Central mentioned the Cheltenham and Gloucester building society, which was given five years' autonomy and independence at the time of the acquisition. It is now part of Lloyds, but I have been assured that there is no plan to change its status as a consequence of the merger or of any other issue. As far as I am aware, it will remain


independent. I undertake to give my hon. Friend any information that is available from Lloyds TSB about the post office initiative.
The hon. Member for Twickenham (Dr. Cable) questioned the benefits to customers. I listed some of them earlier, and will not bore hon. Members by repeating them. His remarks about internet banking in his constituency reinforces my point about footfall in branches: people with access to the internet and direct banking prefer that system to going to branches. He also referred to a further acquisition, but in view of the problems that I have had getting the Bill through the House, I hope that it is a long way down the line.
I agree with the hon. Member for Aldershot that this is a good opportunity to debate the issues. Without wishing to be derogatory to any of its members, I said that the Hill Samuel action group had only 200 members and mentioned in the same breath the number of shareholders, customers and people who want the House to approve the de facto merger.
The hon. Member for Aldershot also graciously referred to meetings with Lloyds over the past few days, and asked for further undertakings about the deferred pensioner trustee. I cannot go further than the letter that has been sent to him, but Lloyds will have taken his remarks on board. I shall ask Lloyds TSB to consider whether the assurance can be reinforced and made more concrete. However, I am sure that Lloyds will genuinely and sincerely consider what has been said in the debate. It will study the speeches closely and try to deal with those as far as it can.
I take on board what the hon. Gentleman has said about differences in pensions, particularly in relation to male and female employees. I have always supported equal opportunities and, if what he says is true, obviously that is a cause for concern. Again, I am sure that Lloyds TSB will address that in future meetings, either with Conservative Members or with the action group.
The hon. Gentleman asked for a clear-cut assurance on an independent assessor. Again, I will put that to the bank. It has taken on board what has been said. If it can go further than what is in the letter about an independent assessor and pensions ombudsman, I am sure that it will wish to accommodate the action group's wishes and those of Conservative Members.
I take on board what the right hon. Member for Cities of London and Westminster (Mr. Brooke) said about the membership of the Hill Samuel action group, but I still think that that has to be weighed against the number of customers and shareholders who have voted for the merger to go ahead. I thank him for his comments regarding the TSB Foundation, of which he is obviously aware in view of his constituency interest.
I take on board what the right hon. Gentleman said about the decreasing levels of pensions, the steps by the present Government to deal with that and the pension reviews that are taking place. On the assurance about ring fencing, which appears in the Hill Samuel action group briefing material, I can only refer the right hon. Gentleman to what was said at the meeting with his two colleagues and the deputy chief executive. I am sure that the deputy chief executive will stand by that and by what was said as recently as this lunchtime.

Question put and agreed to.

Bill accordingly read a Second time, and committed.

Orders of the Day — Agriculture (West Dorset)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jamieson.]

Mr. Oliver Letwin: I read in the summary agenda that is now helpfully provided that we have until 10.30 for this debate, but I hasten to reassure both you, Mr. Deputy Speaker, and the Minister who kindly attends that I have no intention of dragging out my remarks for any such period.
Just before the recess, perhaps somewhat mischievously, I asked a question—at what should have been Prime Minister's Question Time, but turned out to be questions to the Deputy Prime Minister due to the absence of the Prime Minister on more important business—about whether there was a place for dairy farming in particular in the Prime Minister's vision of cool Britannia. I was reassured to hear the Deputy Prime Minister tell us that, in the view of Ministers', there was a place for dairy farming.
I asked that question partly because of my experiences in West Dorset of the current state of farming and of allied industries, and partly because of the evidence, which I think is mounting, of the attitude of Ministers in the relevant Department to that state of affairs, and their vision of how it might evolve. It is those two points that I want to deal with this evening.
The first of those concerns—the concern about the actual state of farming and of allied industries in West Dorset—is born in on me, as I am sure it is on many of my hon. Friends and many Labour Members, almost daily by correspondence, meetings and visits to farms. As the Minister will be aware, West Dorset is a constituency that happens to contain an economy that, apart from some high-tech activity and tourism, depends almost entirely on the welter of services that administer to farming, and on farming itself. Therefore, for anyone representing such a constituency, what is going on in farming in such a place is of urgent concern.
The pattern revealed in the dry statistics, where we are frequently reminded that farm incomes have dropped by between 30 and 40 per cent., is not the pattern in West Dorset, where it is far more exaggerated. I hope that, without unduly trying the Minister's patience, I can do something that I fear, from my experience in Whitehall and perhaps from his experience as a Minister, too seldom happens: to try to bring home to him and to his Department issues that come to a constituency Member directly, but that often for a Minister are filtered through layers of charming and intelligent bureaucrats, to the point where perhaps some of the poignancy is evened out.
I quote just a few of what are in fact several hundred such letters from West Dorset farmers and people in industries connected with farming there. A well-known farmer writes:
We … rear first class, quality beef, pork and lamb and we can assure you that the fluctuations in the livestock market over the last year have crippled our business. Over the last twenty years our situation has never been more difficult.
Another equally well-known farmer writes:
We are established farmers"—

we are talking here of a substantial farm—
working hard against the odds to avoid going out of our profession and becoming a drag on the public purse.
We are talking here not of a diminution of income, but of making losses and going out of business.
A third farmer writes:
My own farm income"—
this is a smaller farm—
is so reduced that after all the long hours worked by myself and my family—
I am sure that the Minister will not want to deny that farmers are a hard-working breed—
at the end of the day our business is running at a loss.
How long can we carry on like this?
However, it is by no means true that such letters come only from farmers. I have one from a concern that perhaps even in the Minister's view and certainly in that of the Deputy Prime Minister and Prime Minister, might have nothing to do with farming: structural engineers, steel stockholders and building contractors in my constituency. It says:
I also remind you of the problems in the rural areas of the traders and people who run businesses and employ people serving agriculture. Farmers are the first to reinvest in the economy when they have the opportunity but clam up when things go against them. This results in terrible hardship for support industries.
Nowhere is the case more poignant than in relation to dairy farms in my constituency. One writes to me:
the milk price has dropped.
That has resulted in a fall of income of £85,000 in our business.
Currently our milk is trading at 5 p a litre less than 12 Months ago and we certainly expect 1998 … will be dramatically worse.
Another dairy farmer writes to me:
If things do not improve in the foreseeable future, I may possibly have to move to Greece … This would not be an easy decision to make as my family have been farming in Dorset for at least 3 generations.
Therefore, a group of small and medium farmers and people who work in industries supporting farming, who are well-established, hard-working people, operating fairly efficient businesses—often very efficient businesses—face not a drop of a third or so in their incomes, but, perhaps because they have borrowed from the banks, leased quota or some combination, or because they have a debt burden stretching back some years, which they are now unable to finance, the likelihood of going out of business in the near future. The problem extends not just to them but to large farms.
One farm in my constituency comprises more than 900 acres, and has a dairy herd and considerable cereal crops. Its owners have presented me not only with anecdotes but with accounts, as have many other farmers. They are experiencing a drop in income not of 30 per cent. but of 80 per cent. for 1997 compared with 1996. As the Minister will realise, that is for a year which by no means reflects the full effects of the pound on farming in general. In 1998, we can expect that the 900-acre farm, which is perhaps one of the larger and more efficient general farms in the United Kingdom, will be making a loss.

Mr. Robert Walter: My hon. Friend and I both represent Dorset, and many of the businesses to which he referred cover both our constituencies. Like him, I have received many letters, and I should like to


read briefly from a piece written by a firm of chartered surveyors which has offices in both our constituencies. It states:
There is a sense of impending agricultural recession and gloom. Farmers by nature have for many years complained about prices and the weather and to some extent I feel have "cried wolf' but now the wolf has arrived … farmers accounts which in many cases end on 31 March will show a significant difference for this year compared to last. For instance I have seen accounts from a 240 acre farm which is farmed by three brothers and their wives; last year they made a profit of £60,000, this year they expect half this … this is only £10,000 a family which is very little return compared with all the work put in and the capital employed.
I hope that that helps my hon. Friend, and makes it clear that the problem he is outlining is common throughout the county of Dorset.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I do not want the debate to spill beyond the borders of West Dorset.

Mr. Letwin: I am grateful to my hon. Friend, because he makes clear a situation that is poignantly felt in West Dorset. I shall not try the patience of the House, but I could echo many times over the sentiments that he describes. I have presented only a small selection of the several hundred letters that I have received.
I referred to the attitude of Ministers. I in no way accuse Ministers of bad faith or irrationality, but I do not think that I am speculating or being unfair in what I am about to say, because the evidence is mounting that they have adopted a clear and ostensibly rational position which is remarkable, and quite contrary to that adopted over the past 50 to 100 years by Ministers concerned with agriculture. The evidence comes not only from their public statements but from what they have said in private when visiting my constituency, and from what they have said to the National Farmers Union when discussing such matters with it.
It is clear that Ministers believe that farming, and, I suppose it has to be said, all the allied trades, have to be seen in much the same light in which Baroness Thatcher once saw the coal mines. At least, that is how we see it in West Dorset.
Ministers appear to believe that farms in constituencies such as mine—farms ranging from perhaps 50 to 1,000 or 2,000 acres—are intrinsically uneconomic. They believe that such farms have been propped up by years of unfair subsidy, and that, in a new wave of Blairite Thatcherism, they should be driven out of business by a harsh but entirely scrupulous and detailed attention to economic reality. I think that Ministers feel that farmers need to be made to face that harsh cold reality, just as Baroness Thatcher felt that it was necessary to make the miners face reality when she removed the subsidies that propped up their pits.
It is not ignoble for Ministers to wish to create circumstances in which businesses—farms are certainly businesses—have to face economic reality. I suppose that I have spent the whole of my so far paltry political life supporting that general view, but I fear that an error is now being made. Perhaps it stems from the fact that Ministers have not attended closely enough to the origins of the theory that they so devoutly espouse.
When Baroness Thatcher and others attacked the subsidies that propped up uneconomic industries, they did so precisely because they believed that those industries

were intrinsically uneconomic. Therein lies the vast gulf between the coal mines and fanning. I cannot speak for all of them, but the vast majority of the farms in West Dorset are not intrinsically uneconomic. They can compete on a level playing field and in an open market, and, to my considerable surprise, I find that they are willing to do so.
When I was first chosen as a candidate in West Dorset, and when I was subsequently elected, I thought that I would face a near lynch mob when I addressed farmers and I espoused free market principles. I found the very opposite—farmers in West Dorset are quite content to face a genuine open market on a genuine level playing field. However, there is not a level playing field; there is not an open market.
On the contrary, the Agriculture Minister constantly tells us that it is part of his agenda to undo the common agricultural policy. Therefore, Ministers must have fully realised that there is such a thing as the CAP. What is it? It is a massive array of props and subsidies, in the main for farmers on the continent, who are much smaller and less efficient. They are being kept in business by that array of subsidies. It is against those farmers—not wholly, but predominantly—that the farmers of West Dorset must compete. There is no open market or level playing field; there is a multifarious and hugely complex system of changing subsidy.
In fact, the situation is worse than that. My farmers have to face other obstacles, quite apart from the subsidies enjoyed by farmers against whom they are competing—they have to face particularly intense environmental, health and safety, and animal welfare legislation. If it would not try the patience of the House, I could read out letter after letter on those issues. My farmers daily find, when they compare their lives and working habits with those of their competitors, that they are constantly at a disadvantage.
I shall cite just one example, but it is a striking one. When the whole vexed issue of beef on the bone arose, the Minister of State and the Minister of Agriculture had the opportunity to insist that beef could be imported only if it satisfied the ultimate test that would have ensured that it could not have infected ganglia, if we are to believe the Spongiform Encephalopathy Advisory Committee report. The Minister could have insisted that only beef under 30 months old could be imported, because the SEAC report makes it perfectly clear that only beef over 30 months old has shown any trace of infected ganglia.
Had the Minister done that, he would have had to ban all imports from all countries that have had the slightest trace of bovine spongiform encephalopathy, other than the United Kingdom, because no other country where there has been BSE has instituted an over-30-months scheme. The Minister chose not to do that, and so failed to remedy one of the aspects that we can describe only as a non-level playing field.
The over-30-months scheme happens to have attached to it the subsidies that make it tolerable for my farmers, but there are many other cases of schemes, rules or laws being introduced—sometimes European directives being enforced too vigorously by our officials—that make it extraordinarily difficult for our farmers to compete on a fair basis against, for example, Italian farmers, who benefit from a somewhat more lax—some may say more realistic or less rigorously proper—application of European directives.
The burden of my argument is that West Dorset farmers are not in the position suggested by dry statistics. They are not suffering a one-third drop in income—in many cases they are suffering drops of 70 to 80 per cent.—

Mr. Owen Paterson: I heartily congratulate my hon. Friend on bringing this matter to the attention of the House. I, too, represent a farming constituency, and the problems are the same in Shropshire as they are in Dorset.
Is it not incredibly frustrating for dairy and beef farmers that world demand for their products is increasing in a straight line? Indeed, world demand for dairy products is increasing annually at a rate of 10 to 15 per. cent. Because of the astonishing improvement in the nutritional demands of the huge Chinese population, demand for beef is growing. [Interruption.] The hon. Member for Dumbarton (Mr. McFall) is making sceptical gestures. He is ignoring the reality that, given a free market and an unshackling of the appalling burdens placed upon them, farmers in Shropshire and Dorset could prosper and take advantage of an expanding world market for their products.

Mr. Letwin: I am grateful to my hon. Friend, as that is exactly the burden of the second part of my argument. My farmers could prosper in an open market, but they do not face an open market—it is a rigged market in many different respects. It is partly rigged by things beyond Ministers' immediate control, such as the CAP and the failures of the World Trade Organisation, and partly by things which are, to a degree, within Ministers' control—our regulations.
Together, those matters mean that the farmers of west Dorset—and hence the chain of suppliers that depend upon them—are not the intrinsically uneconomic coal miners whom the noble Lady Thatcher wished to deprive of their subsidies. They are a different breed. They have been reduced to their present state by Government and intergovernmental action. It therefore behoves the Government to take action to remedy the problem.
Within the CAP are the means to remedy, in part, the particular deficiencies from which my farmers suffer. For example, there is agrimonetary compensation. I hate the CAP in all its devices. I hate nothing more than the device of the green pound, which I associate—emotionally and partly intellectually—with single currencies and other abhorrent devices. However, the green pound had the one great advantage of having associated with it agrimonetary compensation. That was an effort to ensure that, in this "Alice in Wonderland" world of subsidies—and hence intrinsically unlevel playing fields—the playing field could be relevelled by adjusting for exchange rate differentials.
I do not suppose for a moment that Ministers wish to continue with the CAP, and nor do 1. However, neither they nor I can do anything about the fact that the farmers of West Dorset must live with the CAP. Ministers can and ought to play the game by the crazy rules which have been set. It is only if one plays by all the rules that some of the craziness is removed. Ministers ought to be applying for full agrimonetary compensation, but they are not doing so. The Minister of Agriculture has said that he has applied for a small amount of compensation, but it is not enough.
Ministers could try not to impose any further regulatory burdens on my farmers—which stretch back, inevitably, to the supply industries which serve them—which are not suffered by their competitors at this time of the high pound and the failure of agrimonetary compensation. My farmers regard with dismay the proposition that fertiliser or pesticide levies might be imposed. They see all these moves as an effort not to deal fairly with them and not to try to put them in a position where they could compete, but to try to pretend that they can absorb an infinite amount of regulation when their competitors have far less, and to pretend that they can absorb a situation in which "Alice in Wonderland" subsidies prop up their competitors but corresponding subsidies are not provided for them.
That situation will not last. The Minister of State and his right hon. Friend may believe that farmers are, by and large, rich people with large cars or Range Rovers, who have a wealth of capital to fall back on. They may believe, genuinely, that, in the end, they can squeeze the oranges until the pips squeak, and it will all be all right with a bit more efficiency. In West Dorset, it will not be all right, because of three factors: small farmers will quickly go out of business; the supply industries will disappear permanently from west Dorset; and middle and large-sized farmers will be consolidated into great going concerns.
Over time, the face of West Dorset, and its society, will crumble. That inheritance is terribly precious—not just to farmers and suppliers in my constituency, but to people throughout the country. West Dorset is a special kind of society, which works in social terms. People know and support one another. Children grow up in such a way that they become decent people. As they are growing up, people around them look after them in a way that is seldom seen in our cities and is difficult to replicate except in a deeply rural society.
That is a model which the Ministry does ill to attack, and which the country should support. That is why, without the slightest trace of shame or any sense of special pleading, I argue that the Minister should reconsider the Government's attitudes and policies, which will drive the society in places such as West Dorset out of existence, never to be recreated.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Jeff Rooker): I congratulate the hon. Member for West Dorset (Mr. Letwin) on securing this debate, and on being fortunate enough to have more time than perhaps he envisaged—I welcome that. I shall not operate Parkinson's law and expand my comments to fill the time available, but I shall try to answer his points. He has raised these matters with the Deputy Prime Minister, and was active at Agriculture questions on 19 March, although the answer that he was given about extra Government compensation was not as he described it.
I make it absolutely clear that, contrary to what the hon. Gentleman suggested, the Government do not have the slightest intention of doing to farming what the previous Government did to coal mining. Indeed, the analogy somewhat diminishes his case, especially as he was a special adviser in the Prime Minister's policy unit between 1983 and 1986—at the time of the year-long


strike—actively seeking to close down the coal mining industry. The Government make no analogy between the two industries, and he does himself a disservice in suggesting that we do.
The hon. Gentleman represents a beautiful part of the country. Indeed, I was almost there today—I found myself in Hampshire, on campaigning, rather than ministerial, duties. However, Dorset is different from the surrounding counties in respect of the dairy herd. It has a high proportion of dairy herds, which account for some 20 per cent. of the dairy cattle in the county—it is second only to Cheshire in that respect—so it is a very important part of the dairy industry, and we pay tribute to the work that goes on there. There are 90,000 dairy cows in Dorset, which is 5 per cent. of the total in England. The dairy industry there makes a substantial contribution to the economy.
Obviously, farms come into and go out of business. For the avoidance of doubt, I should point out that, between the middle of 1996 and the middle of 1997, 20 farms in Dorset ceased milk production, which is in line with what we would expect in terms of the national average. Because of pressures on the industry, that trend is likely to continue.
We are well aware, and we do not shy from the fact at the Dispatch Box—we say the same things privately—that there has been a fall in farm incomes. Agriculture is going through a very difficult time, and the past year has been a bad one for farm incomes generally and for the livestock sector in particular.
The income from farming is estimated to have fallen by 37 per cent. in real terms in 1997. I accept that average figures are always misleading—some sectors fare better than others—but there has been a fall across all sectors. On average, the fall in income in the dairy sector has been 36 per cent. in one year, and some of those engaged in lowland cattle or sheep farming have faced a drop in income of 63 per cent. in one year. Those figures are in real terms, and I accept that they are substantial.
The principal cause of the across-the-board fall in farm incomes has been the lower prices attracted by all commodities, particularly the major commodities. The relative strength of sterling over the past year has had a major effect on the prices attainable in the United Kingdom—we do not seek to deny that. Unfortunately, while sterling remains high and while there are structural surpluses in most agricultural sectors in the European Union, the prospects for increased commodity prices and improved incomes in the short term are not good.
We have spoken in the House and outside about commentators who have predicted that in 1999 there should be an upturn in farm prices and incomes on the back of a weakening in sterling and more buoyant world markets. Those are the forecasts for 1999 by independent commentators and some banks. The current situation is expected to be temporary.

Mr. Letwin: Will the Minister confirm that those expectations are not shared by the Chancellor?

Mr. Rooker: It is expected that the situation in agriculture will be temporary. For the past year, farm incomes have been bad, and expectations are not good for this year. As I have said, independent commentators have looked at the figures, and have forecast a different situation in 1999.
I accept that there are difficulties in all sectors of agriculture, but we expect them to be temporary. In the five years from 1990 to 1995, farm incomes and agricultural prices were looking up. They were five good years, but I do not use that as an excuse for saying that one has to take the rough with the smooth. However, to take one year in a large industry and react to it as if it reflected the long-term future is not sensible in economic terms, and it would not be good Government conduct.
I accept that farm incomes this year are bad, and I shall deal with the serious consequences of that fall, which, as the hon. Gentleman rightly said, affects not just farmers.
Since we came to government, we have discovered that myths are perpetuated in parliamentary and departmental questions. It is not generally appreciated that, after the 20 March 1996 statement about BSE and new variant CJD, the previous Government laid a statutory instrument on, I think, 16 or 19 April—I cannot remember the exact date—banning the import of beef from animals aged over 30 months from wherever they came. The idea that there is not some sort of level playing field for imports is incorrect, because the previous Government legislated for that.
The Spongiform Encephalopathy Advisory Committee advice, which I shall not go into in great detail because it has been done before, was to de-bone meat from animals of more than 30 months. The previous Government went beyond that, on a precautionary principle, and said that 30 months would be the limit for all beef. They took powers to stop the import of beef from animals that were over 30 months. Therefore, whatever the hon. Gentleman has been told, it is not right to say that vast imports of beef are not subject to the over-30-months rule. Different countries have different rules, and about a dozen countries are BSE-free.
The Government took unilateral action on 1 January on specified risk materials, which requires that point-of-sale imported beef should comply with the same rules as home-grown beef. There is a requirement on the producer and the seller to make sure that that is the case. In that respect, there is not unfair competition, but, of course, we suffer from the inability to export our products. We have laboured consistently on that, and hope fairly soon to start exporting from Northern Ireland.
I shall now deal with the impact of falling farm incomes.
There is no question that there has been a dramatic fall in farm incomes in West Dorset. Detailed figures on a constituency basis are not available, but I fully accept that the hon. Gentleman has reported to the House the footprints or fingerprints of his constituents, and I understand what they say about their individual circumstances. Government cannot collect information in a detailed fashion, but we know that a dramatic fall in incomes in West Dorset occurred simply because of its dependence on dairy production.
We must keep a sense of perspective in looking at the damage to the industry as a whole. There were five good years, when sterling was relatively weak and commodity prices were firm. The hon. Gentleman talked about farmers' debt, but in fact 45 per cent. of all farm businesses carry no debt whatever, although that is not an


excuse to create more debt. We expect the present circumstances to be temporary. Debt will rise in the farming industry, but it is not massive.

Mr. Letwin: I am doubly grateful to the Minister for giving way again. Does he accept that those figures can be misleading? In my constituency, many farmers are severely burdened with off-balance-sheet debt in the form of leased quota, which can be just as important to a dairy farmer as debt on the balance sheet.

Mr. Rooker: I fully accept that. Some farmers will be badly hit by extra investment or debt that they did not expect, because they did not foresee the ban, the drop in commodity prices or the strength of sterling. I freely accept that debt will vary enormously: I have simply given an overall figure, and draw no general point from it.
The effect of last year's fall in farm incomes may not be so dramatic in the long term. There is good reason to believe that most farmers—I will not argue about semantics: by most, I mean the majority, or more than half—will be able to ride out this difficult period. We are not being complacent, but we must take a rational, long-term view of the industry's prospects.
I take on board what the hon. Gentleman said about allied industries. To my astonishment, I was the first Minister ever to visit the only British plough producer, in Warwickshire. It is a real success: a family business less than 30 years old that exports ploughs to Japan. It survives on exports, and is obviously desperate for more, simply because it can foresee a decline in home orders because of the drop in farm incomes; when those go down, farmers naturally order less capital equipment.
There is a knock-on effect on allied industries, some of which are wholly involved in agricultural production, while others have a wider spread of customers, so it is not always easy to track exactly what happens. I know from my time in manufacturing industry that there is a downturn when one's customers are suffering because of particular problems in their own industry. I accept that point fully.
The hon. Gentleman mentioned agrimonetary compensation, which is a bit of a mouthful.

Mr. Paterson: Will the Minister give way?

Mr. Rooker: No. I want to make the point about agrimonetary compensation. I have answered enough questions from North Shropshire, and I want to stick to West Dorset for the moment.
I know that there is a desire for us to pay more of the compensation that is available under the schemes, but the money is not free. More than most Conservative Members, the hon. Member for West Dorset knows that it is not free money. My right hon. Friends the Chancellor and the Minister of Agriculture do not simply have to pick up the phone and ask for the money: there is a massive contribution from the British taxpayer. It is worth repeating that it is not free money, there for the taking at no cost to the taxpayer.
I am not going down the byways with this. Everyone knows of the public expenditure limits and constraints that we freely entered into in our contract with the electorate.

That contract is what we are sticking to, and there is a downside to restricting public expenditure, in terms of collateral damage.
I understand the concern among farmers about the possibility of further green rate revaluation, but we have to look at the wider picture. The agrimonetary compensation system has provided protection for the United Kingdom farmer against the consequences of the strength of sterling. It is difficult to say that the money is in pocket, but the freeze in green rates for direct payments has benefited farmers by about £400 million in the past two years, and that is not always fully appreciated.
The hon. Gentleman referred to the package of measures that my right hon. Friend the Minister announced initially in December, and reaffirmed, slightly adjusted, in February. The grand total of £85 million was the same, most of which went to the beef sector with a minority to sheep.
The livestock industry faces exceptional circumstances and we had to go to the European Commission to get approval for our proposal. Most of the payments have now been made. We intended to get them all paid by Easter, and I regret that we have not fully complied, but most of the cheques were in the post to farmers early in March. However, that package was exceptional, and must be seen against a tight background on public expenditure. We will keep the situation under review. We have promised to do so, and will do it at each step in the process.
The hon. Gentleman referred to the milk price and the difficulties that his dairy farmers have suffered as a result. The Government do not control the price of milk. He, more than most Conservative Members, must know that the dismantling of the milk marketing boards and going for market prices for milk has had consequences. One is that Ministers do not fix farm prices.
I understand that many farmers rightly look at the prices of goods in supermarkets. Raw materials make up a smaller proportion of our food prices than they used to because of the massive amount of food processing and we have to consider the problem in the round. We have to take account of the fact that supermarket prices are largely determined by competitive pressures, which in the main are good, as competition brings greater efficiency and lower prices to consumers.
I accept that there can be a downside for the original producers, but we live in a market economy, constrained, of course, by our membership of the European Union and by the common agricultural policy.

Mr. Letwin: The Minister has been extremely patient, and I am grateful to him for giving way again. I cannot resist asking him whether, in the light of his remarks, he will take special care to join those of us who have been urging the Monopolies and Mergers Commission in its current inquiry into the milk market to consider not merely the wholesale but the retail part of the market. There is an abundance of evidence to show that margins have not responded in the way that competitive pressure should have suggested, and that in fact supermarkets have been taking an increased margin at the expense of farmers.

Mr. Rooker: It would be unwise of me to give a detailed response off the top of my head. I think that the Minister of Agriculture has sent a note to the inquiry, although I could stand corrected, and if I am wrong I will


write to the hon. Gentleman. I should not comment on the details of the MMC inquiry. I see that the hon. Member for North Dorset (Mr. Walter) wants to intervene; I will give way to him, as he also represents Dorset.

Mr. Robert Walter: I thank the Minister for giving way. Does he agree that the value of sterling and world prices expressed in sterling have a far greater effect on prices than competition in the domestic market—whether in milk or other products—the effects of supermarkets or the milk regime? It is the value of sterling that has had the significant effect.

Mr. Rooker: No, the value of sterling has an impact, but it is not the sole impact. From where the hon. Gentleman sits, it might look easy to target the one area that he thinks the Government might be responsible for. It is not like that. The value of sterling does not stand alone: other factors are at work, on which I touched earlier.
I want also to touch on aspects of reform of the common agricultural policy, to which the hon. Member for West Dorset rightly referred. A central plank one of our key manifesto commitments is to seek reform of the CAP. We cannot demand or impose such reform; we can get it only by consent. The Agenda 2000 document was tabled by the Commission. It is the only game in town, and it is the one we have to run with. That is what my right hon. Friend the Minister of Agriculture is seeking to do. It does not go far enough for us, particularly on milk quotas.
We oppose milk quotas, and find extending them to 2006 unacceptable. We want them abolished. They stand directly in the way of the British dairy industry competing in world markets with world-quality first-class products that would sweep the board in many countries if only we could get into them. We have said that repeatedly. That is why we are pressing for reform and the abolition of quotas. We cannot impose it unilaterally, given our membership of the European Union. We have made clear the ends to which we are working. We fully understand that the quota system stands in the way of our quality dairy industry making the best of its business.
We need substantial reform of the CAP, to move it away from production-related support mechanisms. We have to get to a more market-oriented policy for agricultural products. We have no fear of that. We could then redirect much CAP money—not all of it, and we do not have a figure or anywhere near one at the moment—to the rural environment and agri-environment measures.
I was a bit upset that the hon. Member for West Dorset said that his farmers were upset about animal welfare legislation, and thought that it stood in their way. I am

unaware of complaints from farmers that animal welfare legislation approved by this House stands in the way of their running their businesses properly.
We are not prepared to bend the rules on animal welfare. I am not au fait with the point that the hon. Member was making, because he did not give a specific example, but read out a list of barriers, one of which was health and safety. During a recent spot check in one county—not West Dorset—on 4,000 farms by the Health and Safety Executive, 40 tractors were seized and taken off the land because they were unsafe. There will be no diminution of health and safety rules. The farming industry is highly dangerous in some ways. We have no policies for cutting animal welfare legislation. I am not au fait with his point. If he has a particular point, perhaps he will write to me.
The Government have left no one in any doubt that one of our main priorities is reform of the CAP. That is not to say that, within the CAP, we are powerless to do anything. We have shown that by our announcement of the £85 million—extra money that did not come lightly and had a consequence for the British taxpayer—and by our other measures announced a few weeks ago in respect of the Government picking up the tab for the full start-up costs of the cattle tracing system and the first year's costs as well. That is an important measure. The system will benefit the cattle industry. We will have it up and running—going live—this summer. That will greatly benefit the industry.
We have taken on board some of the costs of the specified risk material controls in the abattoirs. We understood the pressures that were piling up on the industry. They were put there not by this Government but by lower commodity prices, the strength of sterling and other factors. Where we could take action, such as with the £85 million and imposing lower costs on the industry, we did. I do not expect a lot of thanks for that, but it is the reality.
We recognise the concern of farmers about the pressure on their industry. I and my colleagues in the Ministry meet farmers regularly, as well as food producers and food consumers. We are working to ensure a long-term future for the UK farming sector.
We are not seeking to put farming out of business—far from it. We want it to be viable. If we came along today or next month with a cheque for whatever amount, that would stop a problem for a week, a month or a quarter, but it would do nothing at all to improve the industry's long-term prospects. We are determined to make sure that we have a long-term viable agriculture.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes to Ten o'clock.